Overview – Estate Planning
Estate Planning is a catch-all term that many mistakenly believe only handles your belongings after death. A great estate plan has multiple goals, benefits, and components. The aspects of an estate plan can be broken down into three key parts: Incapacity, Inheritance, and Protection.
First, we want to be sure we have things in place that should something happen to you in the future that prevents you from making decisions, you can appoint someone else to make those decisions for you. We use Healthcare Directives and Durable Powers of Attorney to accomplish this. Second, we want to leave your things to the right people without unnecessary expense, delays, and headaches.
Second, we want to leave your things to the right people without unnecessary expense, delays, and headaches. We use Wills, Trusts, ownership, and beneficiary designations for this.
Finally, we want to maximize the value and use of your inheritance to make sure that the IRS, lawyers, bankruptcy, creditors, and unforeseen events do not negatively impact your heirs or beneficiaries. This requires a comprehensive approach often centered around Trust provisions either as part of your Will or as a standalone document.
Different Types of Estate Planning
There are three basic types of estate plans.
- Intestate
- Last Will and Testament
- Trust Planning
We use Wills, Trusts, ownership, and beneficiary designations for this. Finally, we want to maximize the value and use of your inheritance to make sure that the IRS, lawyers, bankruptcy, creditors, and unforeseen events do not negatively impact your heirs or beneficiaries. This requires a comprehensive approach often centered around Trust provisions either as part of your Will or as a stand-alone document.
Estate Planning Components
1. Incapacity
The first and most important part of any estate plan is ensuring that you are protected during your lifetime. We utilize Durable Powers of Attorney, Healthcare Powers of Attorney, Advanced Healthcare Directives, and Incapacity Trust Provisions to ensure that if something prevented you from being able to make decisions in the future, you have authorized and instructed the right people to be able to make those decisions for you without going through an incompetency and guardianship proceeding.
Guardianship and Incompetency proceedings are extremely expensive and time-consuming. They also result in the court supervising and tracking every penny and every decision until the person dies or is deemed competent. Rob previously served as a Deputy County Attorney and represented the Department of Social Services in these and other hearings. Trust us when we say you want to prevent a need for these types of hearings.
2. Inheritance
The second part of the plan makes sure that your assets and belongings go to who you want them to go to without lawyers, courts, and financial professionals taking any more than we have to give them. A lot of this goal is centered around avoiding probate. Probate is the legal process of settling a deceased person’s estate.
It is a legal proceeding whereby someone applies for and is appointed as the executor or administrator of the estate. As such, they are an officer of the court and bound by certain rules and restrictions. The probate process is often complicated, and most people choose to hire an attorney to help them wade through the paperwork and various steps in the process.
In addition, the clerk of court charges a set amount based on the value of assets moving through this probate process (currently that amount is $4.00 per $1,000.00 of probate assets). We use beneficiary designations, joint ownership, and various types of trusts to avoid probate whenever possible.
3. Protection
The third and final part of your estate plan deals with protecting and maximizing your assets for use by your heirs and beneficiaries. Let’s look at protecting your assets first. Generally, if a person inherits money or property, those assets are not protected. That means that if a person has creditors, is in bankruptcy, or is receiving needs-based government benefits (e.g., Medicaid) and inherits money or property, the creditors, bankruptcy court, or government entity can take that inheritance and disqualify the person from government benefits until they spend down that inheritance.
Similarly, if a person inherits assets before they reach 18 years of age or are not competent, a guardianship proceeding would be required. Again, those proceedings are very costly and time-consuming and may not allow the assets to be used as you intended. Planning around known and unknown potential problems is usually done with a trust, but other mechanisms or transfer and titling assets may also be used to provide this protection.
The other thing we look at in this component is maximizing the potential use of our assets. That means creating a plan that gives the right amount of flexibility to maximize tax benefits and ensure that particular assets are given to particular people or entities who can get the most use out of them. That may mean giving tools to a son who would use them, or it may mean devising assets with higher tax burdens to charities that don’t pay taxes while leaving unburdened assets to private individuals who otherwise would have to pay taxes.
