So what is an Estate plan?

Simply speaking an Estate Pan is a portfolio of legal documents which declares the Grantor’s wishes and instructs the state, medical establishment, courts, heirs, and loved ones what to do if the Grantor is incapacitated or dies.

Unfortunately no one document, or “one-size fits-all” plan exists. The whole Estate Plan process is simple and complex at the same time.

American law is based on English Common Law and as such an individual has the right to declare what will happen to him or her if they are deceased, or even if they are alive but unable to make decisions. This includes the right to pass onto heirs, of their choosing, the fruits of the Grantor’s labor.

A good Estate Plans will:

  • Nominate someone, called a Personal Representative or Executor, to manage the Decedent’s Will after he or she passes on;
  • Direct who will protect and manage the Grantor’s assets while the Grantor is alive but unable to do so;
  • Nominate someone to speak for the Grantor if he or she is incapacitated for any physical, medical or mental reason;
  • Pre-determined medical and health treatment if dthe Grantor cannot communicate his or her wishes;
  • Redirect the Grantor’s financial affairs to so as to minimize tax liabilities during the Grantor’s life or after death;
  • Direct, within limits, those who will inherit Estate;
  • Provide for the care and protections of loved ones who cannot care for themselves because of medical, mental, physical, or age related incapacities;
  • Provide skip provisions that pass assets on into the future to give another generation part of Estate assets
  • And, for many American families, formulate a plan for the care, protection, growth and provisioning of children who may be left orphaned in the event that both parents die and this can be done by pre-appointment of Representatives as Conservators and Guardians of such children.

How To Create an Estate Plan?

For many people an Estate Plans starts with fining an attorney who will schedule multiple meetings to gather information about a variety of situations and issues that are unique to the future Grantor. Good Attorneys can also offer legal counseling and may bring in accountants and other experts to draft a plan. Such planning, especially in complex situations, will require analysis from a variety of angles and goals. That attorney may also draft an individualized plan for approval or, at the very least, offer written options for the client to ponder and implement going forward.

But an Attorney is not the only option.

Adults can also work with Estate Planners who have expertise and experience in all facets of Estate Planning. These planners may, or may not, draft legal documents and for the Grantors to review with an Estate Attorney.

Any ordinary Attorney is not a good alternative. The Lawyer that can keep you out of jail, or reduce a DUI conviction, or sue your neighbor, may know nothing of estate planning, insurance, medical care issues, or Trusts.

And for either an Attorney or Estate Planner always be sure of the costs and obligations ahead of time.

If you do your own Estate Planning be aware that many pitfalls may lay in your path… finding out about some legal issue too late is… too late. Retakes are few and far between after you are deceased.

Estate Planning Documents

There is no one Estate Planning Document and every plan is different requiring different documents. So let’s start:

  1. First off, a Will, or at least the idea, simply originates from Ole English laws that alleged an individual had a right to give or “will” his property to whoever he desired. We say “he” because in the beginning “she” had no such rights. Women’s rights came later, much later. Essentially a Will allows a Grantor to provide directions and instructions regarding the Grantor’s assets and conveying to a Personal Representative, or Executor, the power to administer and disperse the Grantors assets after he or she dies. It sets up an Estate with legal authority to Probate the Estate but only after the Grantor has died.
  2. Revocable Living Trust (RLT) is really a substitute Will that allows a Grantor, or Grantors, the ability to manage their assets while the Grantors are alive and then extend that management after the Grantor dies. This RLT is a legal entity managed by a Trustee, normally the Grantor during the individual’s lifetime. The RLT assets are gifted to the Trust by a Grantor, also called the “Settlor,” who appoints a Trustee to manage the Trust. If this Settlor/Trustee is unable, for any reason, to manage the Trust business and assets, a Successor Trustee can take over. The same thing happens when the Grantor/Settlor/Trustee dies… the named Successor Trustee becomes the Trustee, which now normally becomes an Irrevocable Trust with a slightly different legal status but again required to adhere to the wishes, or will, of the Grantor/Settlor that are contained in the Trust Document. This succession plan and details about the “Will” of the Grantor/ Settlor must be carefully planned and documented BEFORE the RLT goes into effect.
  3. Irrevocable Trusts (IR) are sometimes set up by Grantors. These IR’s are legal entities with legal, financial, and tax obligations and they have a separate Trustee who is independent of the Grantors in management affairs but still rigidly obligated to adhere to the terms of the IR Trust Agreement. Individuals, banks, attorneys can serve as Trustees and are normally compensated for their services. Grantors often set up IR’s to protect vulnerable heirs who need additional protection or guidance apart from what a Will would provide. Often times individual will provide additional funding by gifts from their individual Wills. By the way, an IR is an excellent means of passing off assets to future, or skip, generations. Perhaps ironically the Grantor can act as Trustee until he or she dies and then a successor Trustee takes over.

    But death is not the only problem Estate Planning can tackle!
  4. Financial Powers of Attorney (POA) are another key planning tool. Sometimes called a General Durable Power of Attorney, this forward looking document addresses the needs and authority to control the Grantor’s finances in troubled times. With a POA, a personal representative, call Agent, can control the Grantor’s personal financial matters if the Grantor is unable to do so because of physical, medical, mental, or physical situation. It becomes effective when preset perimeters are triggered and ceases when the Grantor is competent to regain control. This is a powerful tool and we suggest a doctor(s) determine medical or mental competency. The Agent has no control over personal financial management after the Grantor dies. That power is then transferred to the Estate Personal Representative or the Trust Trustee.
  5. Business Power of Attorney (BPOA) is similar to the personal POA but refers to the independent business operations of an individual. This is especially important for sole proprietors, majority and officer class shareholders of S Corporations and single member LLC’s. Every business needs an operating agreement and a succession plan. The reason lies in the nature of business contracts and ownership. If an individual leading any of these business entities can not function the entire business operation may be jeopardy and come crashing down before its leader can retake charge. Often times the mate of a business owner does not have the expertise to continue the business is an emergency situation. A carefully chosen friend, associate, or lieutenant may save the business to see another day. This Business POA does not necessarily die with the death of the business owner but the Agent is likely (and should be legally bound) to provide set benefits to the Estate. Careful, careful care should be used in drawing up this legal document This BPOA can be written in the company bilaws, legal agreements, or separate legal contracts.
  6. Medical Power of Attorney nominates an Agent to make health care decisions in the event an individual cannot do so or communicate those wishes. Normally the individual’s mate steps into this role, but maybe h/she is not the best person for the task. This Agent acts on the individual’s behalf while that person is living but unable to communicate, regarding minor or critical decisions. One advantage of the MPOA is that it can be written and become effective immediately or at a later time or even over time. It can be revoked when the individual is able to make decisions. A similar Mental Power of Attorney is also advisable covering mental and phycological problems that may not be as apparent as a physical injury or sickness. This is especially important for individuals with a history of mental illness or drug usage. Either of these POA’s needs the protection of a doctor’s diagnosis and signature. As an aside, it is also a protection for the decision maker who may have to make very difficult decisions.
  7. Declaration of Disposition of Last Remains/Burial gives a living person’s instructions about the disposition of his or her Last Remains after death. Many people think the EPR makes this decision, and it is often the case, but it is not a legal right of the EPR. This Disposition gives directions, instruction and information about the remains and the events surrounding the remains. It answers such questions as burial or creation or such matters as a funeral or memorial service. And if the deceased has a burial plan, such as a place prepaid burial plot or even a cremation plan. Such information can lift a great burden of the family and perhaps give the EPR a heads up on possible financial burdens of the Estate. This document is also a key to unlocking contracts regarding prepaid plans.
  8. Other Benefits for Heirs may also be available. For instance a Payable-on-Death (POD) beneficiary designation on IRA’s, Retirement plans, investments documents, and Bank accounts as well as many financial plans haveTransfer-on-Death (TOD) provisions going automatically to the co-signer. Joint tenancy financial arrangement also nearly always transfer to the co-signer. Life insurance always by-passes the estate and the Probate process. Husband and wife joint ownership of property also passes without incident (but with possible attendant debt).
  9. Tax Planning is a must for nearly every Estate since taxes can possibly be deferred, eliminated, or decreased with proper advanced planning. This can include income taxes, property taxes, and a myriad of Estate taxes. Remember the Estate is responsible for both assets and debts.
  10. Professional Cooperation is another must. Your tax preparer, accountant, life insurance agent, business manager and attorney all play important parts in your Estate management but they seldom meet or communicate with each other. You might compare it to a football team never getting into a huddle…and expecting not to be crushed. Probably the Estate Planner or attorney ought to be the point-man in this endeavor if the individual lacks expertise or time to get the plan “up and running.” It is important for the individual to understand the role each plays in the Estate Planning process. Take a look at these professionals:
    • The Tax Preparer is likely to have followed the client’s money matters, investments and deductions for a number of years;
    • The Life Insurance agent has ready access to a variety of financial tools and scenarios and the creation of an “instant estate;
    • The family Accountant may or may not play a role in many Estate Planning panels but if the individual has a personal or business accountant this guy will have important input.
    • The Financial Advisor, like the Life Insurance agency, has ready access to investment, estate planning and money matter software packages that can be coordinated with other financial partners. Even if the individual only has company retirement plans, a Financial Advisor is worth some money to improve financial performance prior to death;
    • The Attorney is another key part of the Estate Plan. Making everything legal will save a lot of time and money down the road.
    • The Estate Planner, and most people don’t have one, makes it his or her business to look out for problems and come up with solutions. This person;s experience and training may be as important as the Attorney in making the Estate Plan bullet proof;
    • The Life Partner (be they wife, husband, significant other, whatever) is not just a silent partner or perhaps even a friend but rather a key component in any Estate Plan. Now if this person is not a professional in the same vain as those above… he or she likely has insights of this person that are as important as any professional’s educated guess.

Once again...too late is really, really too late!

And in conclusion

Every Estate Plan is unique… like fingerprints, no two family situations are alike: Available and potential asset, goals, health issues, family dynamics, retirement plans, IRA’s, Social Security benefits, family debt, age, even IQ, makes every Plan a one-of-a-kind affair.

A good plan will makeup for a lot of unfavorable factors and still magnifies advantages on the ground.