Estate Planning: The Basics
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Estate Plannig: The Basics

Estate planning is the process of anticipating and arranging for the management and disposal of a person’s estate following their death. The goal of proper state planning is to have everything in place during the person’s life, while also minimizing the impact of gift, estate, generation skipping transfer, and income taxes. Estate planning also incorporates the planning of what to do for the individual who has an estate if they are incapacitated. Estate planning as a whole helps to reduce or sometimes eliminate entirely any uncertainties over the administration of an estate with the goal of maximizing the value of the estate. and maximizing the value of the estate by reducing taxes and other expenses. The ultimate goal of estate planning can be determined by the specific goals of the client, and may be as simple or complex as the client’s needs dictate.

But how do you know where to begin when it comes to planning an estate? At its simplest, it’s a process of inventorying all of your assets, big and small, to determine a face value of the estate. Many find the idea of doing a detailed asset inventory daunting. Equally concerning is the unfortunate truth that estate planning forces one to consider their mortality and other end- of- life decisions. The painful truth is that we all will die. However, those who properly prepare an estate will leave their loved ones in a far better, less painful situation than those who avoid preparation altogether.

Those who become incapacitated or pass away without an estate plan will leave their family in a very difficult situation. They will be forced to go through the legal process of probating the estate without the guarantee that it is divvied and divided according to your wishes. Probate lawyer fees, probate court fees, and an assortment of other fees and costs will severely inhibit the true value of your estate. In extreme cases, the Department of Revenue and IRS could end up with as much as half of the value of your estate if a plan is not in place prior to your passing or incapacitation.

There’s an unfortunate misconception about estate planning that it’s only necessary for our elder population. Anyone with assets, particularly parents, should strongly consider having their estate planned as early as possible. Young parents commonly are unaware that guardians may have to be appointed to their children in the event of an unfortunate accidental passing. Guardianship and appointment of who the parents would choose as guardian can be done preemptively through estate planning. There are so many other asides and aspects to any given estate case that it’s impossible to cover every possibility without knowing the facts on a case by case basis.

No matter how much, or little, someone has, they have an estate. Your estate is everything you own. It is your house, your car, your bank accounts, your stocks, your property, special collections, and on and on and on. The second most common misconception when it comes to planning an estate is that they are only for wealthy individuals. The simple truth is that everyone can benefit from planning their estate, regardless of the size and value of the estate.

ESTATE PLANNING: THE PLAN AND THE PARTS

Having established what constitutes an estate and who holds estates, the next step is to understand how an estate is prepared. The bulk of estate planning is done in the form of legal document preparation. This is where attorneys and their expertise are frequently enlisted. The most common misconception for those planning an estate is that a Last Will and Testament is sufficient to plan the entirety of an estate. While the Last Will and Testament is crucial, it is only beneficial in determining what is done with your estate post mortem. Critically, there is no information given in a Last Will for what to do on your behalf while you still live in the event that you are incapable of making your own decisions.

This is where the Health Directive kicks in, also known as a Living Will. This document is the second portion of a standard estate planning package. The Health Directive gives both family and medical personelle instructions on how to care for you in the event that you are unable to care for yourself. Decisions such as how much, or little, medication and equipment to use to preserve your life are made and executed to your wishes through this document. Those who do not have a health directive in place will find themselves at the mercy of the standard procedures of the medical facility where they are being treated, with or without the blessing of the patient and his/ her family.

The third and fourth portions of a standard estate planning package are the power of attorney and the HIPA (Health Insurance Portability and Accountability Act) Waiver. The power of attorney document allows authority to be granted to an individual of your choosing to make executive decisions on your behalf in situations where you may be unable to do so yourself. This would give the agent of your power of attorney the ability to help access bank accounts and make authority decisions that may help or benefit you when you’re incapable. It’s important to note that the authority granted to an agent in a power of attorney is only valid so long as you’re incapable of the action yourself, and upon returning to full capability all power is given back to you. The HIPA waiver helps on the medical end by granting family the ability to receive medical records and information on your behalf. This can be a critical portion of an estate, as regular process of retrieving medical information or documents can be extremely frustrating and lengthy.

Even those who already have a full estate planning package in place can benefit from reviewing and revising it, especially if it’s several years out of date. You would want to make sure that it is still legally binding as estate laws do change over time. You also want to be sure it still fits the goals and expectations of your estate. With that being said, all signs point to immediate action. No one is promised tomorrow, so rest easy knowing that your estate is prepared properly and to your wishes by acting today. We are happy to prepare your estates and trusts and we look forward to working with you.