Protecting Yourself and Your Loved OnesWhile it is difficult to think about your death or disability, creating an estate plan is one of the most critical steps you can take to protect yourself and your loved ones. Thoughtful estate planning not only puts you in control of your finances while you are alive and well, it can also spare your loved ones the expense, delay and frustration associated with handling your financial and legal affairs when you pass away or become incapacitated.
Power of Attorney Documents
Should you become incapacitated, naturally, you will not be able to manage your financial or legal affairs. Many people mistakenly believe that their loved ones can automatically take over for them should they become incapacitated. However, in some situations, for others to be able to manage your finances, they must petition a court to declare you legally incompetent and obtain guardianship over you. This process is often lengthy, costly and extremely stressful and cumbersome. Even if the court appoints the person you would have selected, they will have to provide the court with an annual accounting of your finances, and they may actually have to come back to court and show how they are spending and investing each and every dollar of your estate. If you want your family to be able to immediately take charge, you must take legal action to designate a person or persons whom you trust so they will have the authority to manage your financial and legal affairs, such as - withdrawing money from your accounts, paying bills, taking distributions from your IRAs, selling stocks, and refinancing your home. Since a Will does not take effect until you die, a Will would not help you in this situation.
Not only is it important that you plan for the legal and financial aspect of your affairs during incapacity, it is critical that you establish a plan for your medical care. The law permits you to appoint someone you trust - for example, a family member or close friend to make decisions on your behalf about medical treatment options if you lose the ability to make these decisions for yourself. You can do this by utilizing a medical power of attorney, where you designate the person to make these crucial decisions. In addition to a medical power of attorney, you should also have a directive to physicians and family or surrogates (living will) that informs others of your end of life medical decisions such as the use of life support/life sustaining measures.
Helping You Avoid Probate
After you die, if you transfer your estate to your loved ones using a Will, everything you own that does not have a beneficiary or pay on death/transfer on death designation, will pass through probate. This process can be costly, time-consuming and is always open to the public. Unless your Will appoints an Independent Executor, the probate court will most likely be in control of the process until the estate has been settled and distributed. If you are married with children, you want to make sure that your surviving family has immediate access to funds to pay for living expenses while your estate is being settled. Depending on how your assets are titled, your surviving spouse may have to apply to the probate court for needed cash to pay current living expenses. You can imagine how stressful this process can be, especially during a time of tremendous grief and sorrow. With proper planning, your assets can pass to your loved ones without going through the court system of probate, in a manner that is quick, less expensive and private.
Providing for Minor Children by Utilizing Trusts and other Legal Strategies
It is imperative that your estate plan address issues regarding the upbringing of your children. If your children are young, you may want to consider developing a plan that will allow your surviving spouse to devote more attention to your children, without the burden of work obligations. You may also want to provide for special counseling and resources to support your spouse if you believe they lack the experience or ability to navigate financial and legal matters. You should also discuss with your attorney and develop a plan should both you and your spouse die simultaneously, or within a short duration of time. A contingency plan should indicate persons you’d like to manage your estate assets as well as the guardian you’d like to designate to care for and raise your children. The person, or trustee in charge of the finances need not be the same individual as the guardian of the person. In fact, in many instances, you may want to purposely appoint different persons to maintain a system of checks and balances. If you do not put a plan in place, the decision as to who will manage your finances and raise your children will be left to a court of law. Even if you are fortunate enough to have the person or persons you would have wanted selected by the court, they may have excessive burdens and restrictions placed on them by the court. Just make sure that you carefully choose your guardian and be certain he or she shares the values you want instilled in your children.
Other issues to consider in this respect include whether you’d like your beneficiaries to receive your assets directly (outright) or whether you’d prefer to have the assets placed in trust and distributed based upon a number of factors that you designate. Leaving assets in trust for your beneficiaries can provide them with protection from lawsuits, creditors and “predators”, including a potentially difficult divorce situation.
Reducing or Avoiding Death Taxes
The size of your estate and how your estate is planned, will determine whether or not federal estate tax will be owed. A number of states have their own separate estate and inheritance taxes of which you need to be aware. However, in Texas we have only one estate tax – federal. Many well-established strategies can be executed to reduce or eliminate death taxes, but you must begin the planning process early to implement many of these plans.
Charitable Bequests – Planned Giving
Do you want to provide assistance to a charitable organization or worthy cause? Your estate plan can provide for such organizations in a variety of ways during your lifetime or upon your death. Depending on how your planned giving plan is established, it may allow you to receive a stream of income for life, earn higher investment yields, or reduce your capital gains or estate taxes.
Comprehensive Estate Planning Services for Your Peace of Mind
A well-crafted estate plan should provide for your loved ones in an effective and efficient manner by avoiding guardianship during your lifetime, probate at death, estate taxes if possible, and unnecessary delays. You should consult a qualified estate-planning attorney to review your family and financial situation along with your goals and concerns so that the attorney can explain the various options available to you. Once your estate plan is in place, you will have peace of mind knowing that you have provided for everyone you love and everything you own.