WHAT IS ESTATE PLANNING?
Estate Planning involves the development of a plan regarding the administration of your estate on either your death or incapacity. Many people believe that a Will is the only estate planning document necessary; however, planning for incapacity is an important element in the development of a comprehensive estate plan.
When developing an estate plan, a person should ask themselves several important questions:
- Who would I like my property to pass to upon my death?
- Who will administer my estate upon my death or incapacity?
- If I have a beneficiary with special needs, what options are available to ensure that he/she is taken care of financially while preserving eligibility for government benefits?
- What happens if I am unable to pay bills and make my own medical decisions?
Estate planning empowers the individual to make financial and medical decisions and allows the person to appoint individuals and/or financial institutions to positions of power to ensure that the estate plan is implemented.
WHY IS A WILL IMPORTANT?
It is a common misconception that a Will avoids the necessity of probate. However, a Will ensures that the probate process happens in a more cost-effective and efficient manner. A properly drafted Will ensures that your final wishes regarding the disposition of your estate occur.
A Will can also protect your estate’s beneficiaries. Testamentary trusts (i.e. trusts that are effective only upon your death) can created for your estate’s beneficiaries and provide several benefits, including creditor protection, tax savings and the peace of mind that your legacy will continue for your family. Additionally, a testamentary special needs trust can be created for the benefit of individuals with special needs who may receive government benefits.
WHAT IS A TRUST?
A Trust is a legal entity used to administer and manage the assets of an individual. A Trust can either be created and funded during the grantor’s lifetime or created upon the grantor’s death for a named beneficiary.
Trusts serve many purposes. A Revocable Trust can be created to manage your funds and upon your death such a Trust avoids the necessity of probate. A Special Needs Trust can also be created to preserve eligibility for government benefits.
Many people think Trusts are expensive and difficult to manage; however, with proper guidance a Trust can preserve assets for the grantor and his or her family.
PLANNING FOR INCAPACITY
The following documents are necessary to ensure that your financial and medical decisions are made in the event of your incapacity:
- Statutory Durable Power of Attorney (financial power of attorney);
- Medical Power of Attorney;
- HIPAA Authorization; and
- Directive to Physicians (also referred to as a “Living Will”).
Other documents to consider include a Declaration of Guardian in event of incapacity or for minor children or children with special needs and a Disposition of Remains. Even though many of these documents are standard forms, it is recommended that these documents are customized to ensure that your wishes are carried out.
Failure to properly plan for incapacity may result in the necessity of a guardianship, which can be costly and place a burden on the family.