I often lament that as an estate planning attorney, I fight the “mortality battle.” People don’t want to contemplate their own death, but there are many reasons beyond death why it is important to have an estate plan. In addition to leaving instructions on the distribution of your property, an estate plan can direct the management of your assets while you’re alive and can provide guidance for your health care decisions when incapacitated or critically ill.
To clarify the estate planning process and the reasons for the various components, here are answers to some common questions:
What is an Estate Plan and Why Do I Need One?
An estate plan is a comprehensive plan consisting of multiple documents that you put in place to prepare for the distribution of your assets upon your death and for your care in the event of incapacity or critical illness. You do not need to be near the end of your life to need an estate plan, because estate plans can do so much more than plan for your death.
Everyone’s estate plan goals are different, but they are an important part of planning for incapacity, avoiding estate taxes, and streamlining asset distribution upon your death. Estate plans help prevent conflict about your belongings after you pass. If you die without an estate plan, your family members will be tasked with allocating your property, paying estate taxes, and navigating the process of probate.
What Happens if I Die Without an Estate Plan?
If you were to die without an estate plan, a court will decide how to distribute your property. State laws govern the distribution of a decedent’s property if that individual dies intestate (without an estate plan). However, these default rules may align with your wishes or intentions. An estate plan is an easy way to ensure that your property is distributed according to your wishes.
Having a trust in place can avoid going through a probate court to administer your estate. Probate is the processing of filing your death certificate and various petitions to ask the court to assist in distributing your belongings to your loved ones. It can take months, or even years, depending on the size of your estate. The probate process is costly, time consuming and public, often resulting in the delay of distribution of your assets.
Many estate planning documents also plan for incapacity during your life. Without these critical documents, your family members could also be burdened with making critical end-of-life decisions on your behalf without knowing your end-of-life care preferences.
Why Do I Need Anything More Than a Will?
State law determines whether an estate needs to be probated. Often, the way around probate is to place all of your assets in a trust. Trusts can be designed to minimize estate taxes and protect assets from creditors during your lifetime. Trusts also allow your family to bypass the probate process by allowing them to handle your affairs after your death without court supervision or intervention.
What are Powers of Attorney?
Documents such as Durable Powers of Attorney and Health Care Proxies can be essential tools in planning for your incapacity. These documents ensure that you designate a person to make financial and medical decisions on your behalf if you are ever unable to make them for yourself. A Durable Power of Attorney allows the person you designate access to your assets so they can handle your financial affairs if you are incapacitated. A Health Care Proxy allows your designated person to make medical decisions for you and ensure that your doctors follow your wishes. Also included in a comprehensive estate plan are advance directives (living wills), HIPAA release authorizations, and possibly, do not resuscitate (DNR) orders.
Who Are Fiduciaries and How Do I Choose Mine?
Fiduciaries are the individuals you name in your estate plan to handle your estate after death. Under your Will this would be your Personal Representative (or Executor), and under your Trust this would be your Trustee.
When choosing your Personal Representative or Trustee, it is important to consider your relationship with that person and how they would handle your assets after your death. Acting as a fiduciary can often be a big responsibility, so you should choose individuals who have the , knowledge and ability to handle your affairs.
You can also designate an attorney-in-fact under your Durable Power of Attorney and a health care agent under your Health Care Proxy to make decisions for you if you are incapacitated. These individuals should be people you trust to honor your wishes regarding your financial assets and medical decisions.
What Happens if I Change My Mind About My Estate Plan?
Aside from a few specific estate planning documents such as irrevocable trusts, estate plans are usually revocable and amendable during your lifetime as long as you are competent. Changes can often be made without having to rewrite the entire estate plan. Therefore, estate planning should not be something you wait to consider but an ongoing part of your financial planning.
I often counsel clients to put an estate plan in place and to treat it as a dynamic instrument to be reviewed and modified as life circumstances change. Although an estate plan is document-based, it must be put into action to ensure that it works according to your wishes. The estate planning process can be daunting, but it does not need to be. Contact Agins Law Firm, PLC at (480) 401-2660 to ensure that your estate plan meets your needs today and in the future.