Estate Planning: The Ultimate 101

Estate planning is never fun. It can lead to stress, anxiety, and uncomfortable feelings about facing your own mortality. This is why it is best to get it done correctly and quickly. This estate planning overview is a great place start and get a better idea of why it is important, what to expect and what to cover with your estate planning attorney.

Why Everyone Should Have an Estate Plan

Without proper estate planning there are a number of different scenarios that may or may not play out depending on where you live. Whether you are married, have kids, your spouse a biological or adoptive parent to your kids, etc. can all mean different things for your property. Your aunts and uncles could even end up with with your estate.

The point is… PLAN. Estate planning allows you to determine what you want to happen to your estate.

Your Estate Planning Attorney

Deciding on Your Estate Planning Attorney

You’ve probably seen marketing for attorneys who claim they can help you with traffic tickets, bankruptcy, divorce, etc. as well as will and trusts. While some might be qualified to practice in all of those areas, there is a good chance they aren’t a lawyer that focuses enough on estate planning and probate. You’ll probably have a better experience with an attorney who specializes in estate planning and probate.

Preparing to Meet Your Attorney

To help speed up the process and make sure setting up your estate plan runs smoothly, there are some things you can do before meeting with your attorney.

Make a list of everything you have an interest in. That may sound silly but when asked for specifics people often have a hard time remembering everything they own and the details surrounding those things. For example, who is listed on the titles to all of the vehicles you own? How about the details surrounding the home your parents gave to you and your siblings? Having some of these questions answered will better focused your meeting.

Collect important documents such as banking or investment statements, deeds or vehicle titles. While you may not specifically list your financial accounts or your jet ski in your durable power of attorney or will, the estate planning process can still be helped by being able to provide this information. Your attorney can quickly verify who owns each vehicle and if any beneficiaries are included by providing titles.

Consider who you would like to be in charge. A trust, springing durable POA or non-springing POA, healthcare directives and wills all require individuals be appointed to important and specific roles. These should be people that you fully trust, not simply someone important to you or a close family member. I ask people to think about what would happen if they passed or were seriously injured in a car collision. Who do they want to take care of the day to day needs or who do they trust to take care of their children. These are extremely important decisions in the estate planning process and could be thought about well before meeting your lawyer.

Decide where you want your property to go. With the help of a trust, deed of gift, beneficiary deed, or a variety of other non-probate estate planning tools, someone can pass along any type of property over periods of time to any number of beneficiaries. It is important to have an idea of what you want so you can discuss it with your attorney, who will know what your options are for getting your estate plan exactly the way you want it.

Completing these steps before meeting with your estate planning attorney will give you more confidence in what you want and you can better work with your attorney. You’ll probably come up with some great questions to ask that you may not have otherwise.

Wills v Trusts

Wills are the cornerstone of all estate plans.

A will nominates someone to collect your property when you pass, nominates who will care for your minor children and declares who your property goes to.

Even if you have beneficiary designations on all of your property and assets, a will is still a good idea. Wills can act as a safety net in these situations, protecting your wishes. I sometimes use the baseball backstop analogy to describe this function to my clients: A catcher is going to catch most pitches but if the ball ever does get past the catcher, the backstop is there. The will is your backstop.

Trusts are private agreements that end up holding property for the beneficiaries designated. The terms of the trust dictate how the property is distributed from the moment it is executed until it is terminated by its own terms or by a court. There are many different types of trusts and they can be very complex.

A trust is different from a will in that it may start immediately and exist long after you pass away. They are typically preferred by people wanting to place provisions on assets for beneficiaries, are looking for protection from creditors, or have assets that need careful management by a trustee, the person who controls the assets in your trust for you and your loved ones. Usually people prefer to be the trustee of their own revocable trust. When they should die or become incapacitated, a successor trustee steps in. This is often a spouse or child.

Some additional benefits of a trust are that is saves your loved ones stress and money, they are kept private, unlike a will, and provides specifics for your children, such as your wishes for their education, college funds, and setting distribution amounts and dates.

I often get asked what differences there are between a will and a trust, as if they are mutually exclusive. It is common in many cases to have a will and a trust. They can work together in the right estate plan.

Power of Attorney

When most people think about a power of attorney, they are most likely thinking about a power of attorney for financial purposes. The document allows someone named, also known as your attorney in fact, to oversee specific financial or contractual obligations if you should become incapacitated. It might allow someone to sell your house, withdraw or deposit funds, and make sure your bills are paid timely.

Like a trust assists your loved ones after you pass away, a durable power of attorney can be just as important while you are still alive.

Attorney in Fact

The choice of your attorney in fact is a important one and there are several things that should be considered.

  1. Your attorney in fact should be financially savvy and able to process paperwork. They may need to access your banking or investment accounts in order to manage your day to day affairs or even possibly sign contracts on your behalf.
  2. Choosing an attorney in fact that is fairly close in location is important as well. While this isn’t a must, the closer the attorney in fact is the easier it will be to manage your day to day affairs and sign any necessary contracts or agreements.
  3. And the most important thing in picking your attorney in fact is that they have to be extremely trustworthy. Remember that this person will be access your financial accounts and records. You’ve probably heard the same horror stories I have about a son or daughter taking a parents’ money for personal use before the parent passed away. If this were to happen it could become virtually impossible to make sure your wishes are carried out after you pass away, even if you have an estate plan in place.

Springing v. Non-springing Power of Attorney

A springing power of attorney doesn’t allow your Attorney in Fact to make financial decisions on your behalf until a specified condition is met. Usually that condition is incapacitation. A non-springing power of attorney, on the other hand, goes into effect once it is signed. A non-springing power of attorney might be used for purposes of convenience where a business owner allows someone else to sign on behalf of the business.

It is important to note that all power of attorneys stop granting power to make decisions concerning and managing finances the moment that the person dies.

Healthcare Directives

A healthcare directive is an extremely important part of the estate planning process. If you are left incapacitated, they allow the nominated person to make medical decision on your behalf and it spells out in advance your choices are for your medical care. These are extremely difficult decisions to be left to your loved ones. There is peace of mind knowing that these decisions have already been made and made by you.

Pets and Estate Planning

Depending on where you live you may be able to establish a trust for your pet. A pet trust is really the only way to guarantee that you pet will be taken care of properly. While your pet is the beneficiary of the trust, a trustee can take care of your pet for its life following directions you have set in place.

DIY Estate Planning

A do-it-yourself estate plan is a common trend with clients dealing with probate administration. I use this term in reference to online estate planning kits or templates.

While heirs want to avoid probate, they come to me because these DIY estate plans weren’t filed correctly or executed or the documents didn’t spell things out like they should have.

Some people do not hire a lawyer is because they think they are skilled enough to complete an estate plan without one. This skill is not the same as IQ. You don’t go to a dentist or an accountant because of their IQ. You go because they are skilled in what they do and they are experts in their field. Estate planning lawyers are experts in applicable state and federal laws as well as the Uniform Trust Code. The average person, regardless of IQ, is not.

Another reason DIY Estate planning is risky is because you only have one chance to get your estate in order. If you were to make an error on an insurance quote for your bank for example, you’d just correct it when the mistake was found. Once you have passed on, however, you can’t make any changes. Your estate plan is what it is.

You should also consider how helpful it may be to contact the lawyer responsible for drafting the decedent’s estate plan at some point. Occasionally they may offer some assistance in clarifying or determining what the person meant, which documents the person created, or if the person even thoroughly went through the estate plan at all. When using online estate planning templates or online will making software, this ability isn’t there. When someone passes so does the chance of them answering any these questions.

Keeping Your Estate Plan Safe

There are three suggestions I make to my clients when I am asked about where they should keep their estate plan documents.

  1. You will want to find a secured place that is fire resistant and off of the floor, like a fire resistant safe or gun safe for example. Some people even chose to use a safe deposit box at their bank. You simply want to keep them where they won’t get destroyed or viewed by someone who shouldn’t
  2. Make sure your loved ones know where the documents are stored. They won’t do any good if you’ve passed away and no one can find them!
  3. I also recommend that my clients give the appropriate estate planning documents to their financial institutions and healthcare providers. Your bank having a copy of your durable power of attorney and your physician having a copy of your healthcare directives only makes life easier for the individuals you’ve nominated to take on these roles for you.

Estate Plan Review

I highly recommend that my clients review their estate plan every 3 to 5 years.

Law regarding taxes, wills and trusts tend to change each year. While a lot of these changes are small, some can be big. These could have a big impact on on your estate plan and lead you to make some necessary changes.

Another reason to review your estate planning documents occasionally is because, like laws, life changes too. Kids grow up, grandchildren come along, loved ones pass away, etc. You grow older yourself. All of these things could very well change your estate planning needs.

Although estate planning isn’t comfortable, getting it done properly and quickly is always best. I have spent years helping my neighbors in the Kansas City area with their estate planning and probate needs. If you need to draft a will or are going through a property dispute, I am here to provide you with top-tier legal advice and counsel. Please feel free to contact me for a free consultation.

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