Estate Planning

Thinking about the future can be both fascinating and terrifying. Unfortunately, no one knows the future. Laws change, people change, society changes and life happens. There are, however, ways you can mitigate uncertainty.

Many people think estate planning is about dying. But comprehensive estate planning is more about life – your life and the lives of the people you love. It is about protecting you and your family by preparing for the future while there is time to plan.
Comprehensive estate planning allows you to:

  • ensure that your values will be respected and your intentions followed in the event of your illness;
  • permit your trusted family members to manage finances and have access to needed health information if you are incapacitated;
  • protect your family from the cost of your health care and long-term care expenses;
  • provide for family members with special needs such as a disability;
  • avoid family disputes;
  • protect and provide for your family after you are gone.

Comprehensive planning starts by planning for the remainder of your life. You need to create a plan that will protect your lifestyle and financial security and help you attain your goals during the rest of your lifetime. Especially important is planning for the possibility of your incapacity. Who should be authorized to step in and manage your finances if needed? Is that person someone you trust? Who should have access to our personal medical information? What financial and medical decisions should they be authorized to make?  What if you need long-term care? What can you do to make sure you can stay at home rather than in a nursing facility? What if you do need nursing home care? The costs are staggering – now over $10,000 per month in Georgia. This can quickly destroy your family’s financial security. With advance planning you can protect your family from this risk.

If you are married, a comprehensive estate plan will help ensure that your spouse will be able to live his or her remaining years with dignity and financial security. At your death, it can preserve an inheritance to pass along to your family in a manner that will not be squandered because of inexperience, illness, or a marriage gone bad.

The first is to think about what you want the future to looks like and prepare a plan designed to get you there. Many people think “estate planning” means signing wills. There is much more to estate planning than that. A comprehensive estate plan should include (1) planning for long-life (2) planning for other problems your family will face as a result of your death (beyond just having a Will), (3) planning for minor children, disabled family members and family members who are financially immature; and (4) doing what you can to minimize risk to your estate through creditor claims, long-term care expenses and taxes. An estate plan should also be values based.

Preparing for Long-Life: A Last Will and Testament isn’t effective until you die. So it does nothing to help your family take care of you if you live beyond your health, or beyond your ability to make decisions. The most common documents used to plan for long-life are: (1) a power of attorney and (2) an advance directive for healthcare. Although we recommend that you have your documents prepared by an attorneys and explained to you, statutory forms are available online.

Third parties, like banks, will frequently require additional documentation such as a certification or affidavit (E.g., Wells Fargo Power of Attorney Packet).

If you are concerned about funding your retirement, you should consult a Certified Financial Planner. We suggest using a fee based, not a commission based, advisor. A fee based advisor’s only interest should be your success and future business you might provide him or her; a commission based advisor will be tempted to steer you into the investment most profitable to him or her.

Planning for Incapacity. Estate planning isn’t limited to planning for death. It also planning for incapacity. To properly plan for incapacity, everyone should have a durable power of attorney for financial AND for health care matters. These will allow someone to manage your financial affairs and make health care decisions if you are unable to do so. You should also consider disability insurance and long-term care insurance as part of your estate plan.

Related documents:

  • Article regarding H.B. 359 that would have expanded powers of attorney relating to the care of minor children to include a broader class of relatives.
  • H.B. 752, if enacted, would create a Psychiatric Advance Directive.

Planning for Death: Everyone needs a Last Will and Testament. Many people need additional devices to protect themselves and their loved ones. The most common “other” device is a Trust. Trusts are particularly useful if you have a family member with a disability or if you want your money spent in a particular way. Specialized trusts can be used to hold funds to enhance the beneficiary’s life without jeopardizing their eligibility for government benefits. Individuals and married couples can set up trusts that will protect their assets from the cost of care in the event of a future disability. In addition, trusts can sometimes be used to minimize taxes. The benefits of comprehensive estate planning are compelling. Once your plan has been implemented, you will enjoy the peace of mind of knowing that you have done all you can to protect yourself and your family from whatever the future may hold. It is never too early to get started. Just make certain that your estate planning is comprehensive.

A fact that is surprising is that even if you have a will, it does not control all of your assets. For example, assets titled jointly with right of survivorship pass automatically to the other joint owner. Assets with beneficiary designations pass to whomever is designated. Fr that reason, it is critical that you update beneficiary designations on life insurance, retirement account, investment accounts and other assets that are jointly owned. Otherwise your Will might be insufficient to protect those you love.

If you have minor children, you can nominate a guardian for your children in your Will. A guardianship for minor children can be avoided by preparing a will that leaves assets in trust for children. Leaving the children’s assets in trust eliminates the guardianship costs and problems discussed above. Trusts also allow the parent to pick the person in charge of the children’s assets.

Death Taxes: Most people will not pay death taxes. However, there are other taxes that could become an issue. Among them are capital gains taxes, income taxes on retirement accounts, and something called income in resect of a decedent. A good estate plan allows a couple to minimize taxes by maximizing exemptions. Sophisticated tax planning may include Life Insurance Trusts, Family Partnerships, Grantor Retained Annuity Trusts, Charitable Trusts, etc..

Special Needs Planning. Often overlooked , children with special needs (such as autism, mental retardation, Down Syndrome, etc.) require special planning. Assets left to them should be left in a “Special Needs Trust,” which can be incorporated into your will. This type of trust is necessary to preserve your child’s eligibility for various governmental programs, such as Medicaid, to provide for basic health care during the child’s life. The goal is to continue the government benefits, while allowing the trust to supplement the governmental benefits and pay for things that Medicaid will not, so that other family members are not burdened. A special needs trust can also protect your child from predators because it must include spend-thrift provisions.

Other Important Considerations: Recognize that each family member has specialized information that should be shared. You might be the one who manages finances, while your spouse or significant other manages relationships or keeps the household running. The easiest way to share this information is to make a recording (and keep it updated). Further, if you have a special needs child, you will need a plan regarding the care of that child if something happens to you.

Speak with your family about your values and preferences. Tell your family what a good future looks like for you. Communicate your end-of-life values. Share your financial and health care values. The best way to avoid future family conflict is to eliminate guess-work regarding your values.

What we are discussing here can be called succession planning. The first thing a good steward does after taking a job is to look for his or her replacement and train that person. After all, you can’t take it with you. Successful families adopt the same attitude as a business engaged in succession planning. If you want your family to be successful over a long period of time, you will train someone you trust to replace you when the time comes.

Resources:

ACTEC Trust and Estate Talk is a free weekly podcast series

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