Estate Planning

Preparing your affairs

Estate Planning involves planning for life and for death. While you are living, you need to ensure that people you trust are authorized to manage your financial affairs and who can enforce your healthcare wishes if you suffer a health crisis and are temporarily or permanently unable to take care of yourself. At the end of your life, you need to make sure that the right people or charities inherit your wealth, that disabled or young beneficiaries are taken care of, and that everything happens as seamlessly as possible. Making these decisions is not always easy, but it will give you peace of mind.

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Some Common Estate Planning Documents

During Life: Financial Power of Attorney and Advance Health Care Directive

To make sure you have the right people in place to take care of you during a crisis, we use a Power of Attorney for wealth management and an Advance Healthcare Directive for medical care.

Power of Attorney (POA)

  • You authorize trusted individuals, or “agents,” to manage your wealth on your behalf.
  • Your agent will be able to use your money to pay your bills and take care of finances.
  • The Power of Attorney will not stop you from being able to manage your financial affairs.
  • Usually, your agent cannot step-in until your doctor confirms that you are unable to manage your own assets. You can also choose to give your agent immediate authority so they can begin helping you right away without waiting for your doctor’s approval.
  • This is almost always a better option than making someone joint on your bank account.

Advance Healthcare Directive (AHCD)

  • You pre-make decisions about how you want to be treated in a healthcare environment.
  • You name agents that you trust to make sure your healthcare wishes are followed.
  • You indicate the type of memorial services you want.
  • By pre-making these decisions, you relieve your agents and family of the burden of making these decisions themselves.

Planning for Succession: Last Will & Testament and Revocable Living Trust

In order to avoid probate, and to appoint potential guardians, beneficiaries, and wishes regarding your property and estate, we use the Will and Revocable Living Trust.

Last Will & Testament (Will)

The Will is a common yet limited tool in estate planning. The Will allows you to decide who will inherit and gives the ability to control how inheritance is managed.

  • If you and your spouse have children from prior marriages, the Will ensures that both sides of the family benefit equally from your estate.
  • If you have disabled beneficiaries, you can ensure that their inheritance will improve their quality of life without disqualifying them from public benefits.
  • If you have beneficiaries that are very young or otherwise cannot properly manage an inheritance, you can provide that their inheritance will be managed by someone you trust.
  • If a beneficiary dies before you, you can name alternate beneficiaries to receive that person’s gift, such as his or her children, other family members or friends, or charities.

For very small estates, a Will can be a good solution. However, for most people who use a Will, their estate must still pass through probate. For most people who own a home or have complex family dynamics, a Revocable Living Trust is a much better choice.

Revocable Living Trust (RLT)

A Revocable Living Trust is a separate legal entity created to avoid the costs and delays of probate. Assets are transferred into the name of the Trust and are managed and controlled by the creator of the trust (called the settlor), while they are still living. Trusts lay out instructions for different circumstances. For example, if the settlor becomes incapacitated, the successor trustee would be appointed to manage trust assets for the settlor’s benefit. At the end of the settlor’s life, the successor trustee would pass the trust assets directly to heirs under the terms of the Trust. In a Revocable Living Trust, the settlor has the ability to revoke or amend the trust at any time. RLTs allow planning for mixed families, contingencies, and young or disabled beneficiaries, while also avoiding the difficulties and expenses of probate.

  • Planning for complex families: RLTs gives the same ability to dictate inheritance terms that Wills do, plus options to plan for mixed families, young beneficiaries, disabled beneficiaries and contingencies.
  • Avoid Probate: A probate is required to move assets from the decedent to their heirs at the end of their life. A Trust avoids this. After setting up a Revocable Living Trust, most assets will be owned by the Trust. At the end of the settlor’s life, the successor trustee will pass the Trust assets directly to the named heirs. Because assets pass from the Trust to beneficiaries, there is no need for a probate.
  • Tax Planning for Large Estates: Couples with significant assets may be subject to estate taxes. A Trust can be used to potentially double the estate tax exemption and minimize the chance of having to pay estate taxes.
  • Maintain Complete Control of Assets: During their lifetime, the settlor has the same level of control over Trust assets that they would have if they owned the assets directly. That is to say that holding assets in the name of the trust does not impact the ability to manage financial affairs. In fact, a Trust can provide more protection as it allows the settlor to specify exactly who should take control and under what circumstances.

Overall, the Revocable Living Trust gives maximum flexibility to give gifts (including end-of-life charitable donations), name beneficiaries and alternate beneficiaries, provide for beneficiaries with special needs, designate instructions for the distribution of property, and generally address the concerns of larger estates, all while avoiding the costs and delays of probate.