Starting the Estate Planning Process

The first step in the planning process is to organize your information.  Make a list of all your financial accounts, including your bank accounts, savings accounts, savings bonds, brokerage accounts, retirement accounts, life insurance policies, and annuities.  Make a list of all of your real estate, including your residence, time-shares, vacation homes, and investment property.  Make a list of all of your debts, including your mortgage, second mortgage, credit cards, and business loans.  Make a list of the names, addresses, telephone numbers and email addresses of all of your family members and any other people or charities you want to benefit at your death.  It is important to have this information readily available to you as we work our way through the process together.

Next, think about who you would want to handle your finances if you were unable to do so for yourself.  Most spouses designate each other as their first choice.  But you have to dig deeper.  Your spouse may not be able to handle your finances, and therefore you should think of at least two other people, in succession, for this position.

Keep in mind that whoever you select for this position will either be taking care of you (if you are disabled) or handling the distribution of your property to your beneficiaries at your death.  Consequently, this should be someone you trust absolutely and can depend upon to handle your money with the utmost integrity.  You can select one person to act by himself or herself, or you can select two or more people to act together.  Sometimes it makes sense to appoint a bank or trust company to handle your finances.  Keep in mind, however, that a bank or trust company will charge a fee for their services.

Next, think about whom you would want to make medical decisions for you if you can’t make such decisions for yourself.  Again, most married people designate their spouses, and then name people with whom they they would be most confortable handling such personal decisions for them.  In many cases selecting a family member who has medical training is a good choice.  Otherwise, it makes sense to select a person who is most likely to make the same health care decisions you would make in various circumstances, including in the event you are dying and there is no likelihood you are going to recover.

Next, if you have minor children, think about whom you would want to serve as their guardian and conservator if both you and your spouse died.  Have in mind one or two successors in case your primary person is unable or unwilling to serve.

Finally, give some thought to how you want your property distributed at your death.  Many married couples with children leave their property to each other first, and then split it equally among their children.  Single people often leave their property to parents, brothers and sisters.  Grandparents sometimes leave property in trust to support the education of their grandchildren.  Some people leave a portion of their property to their church or another charity.  There is no right or wrong answer here.  The idea is to decide upon a distribution plan with which you are comfortable.  And remember -- it’s your property.  You can do whatever you want with it when you die.

"The first step in the planning process is to organize your information."

The Revocable Living Trust

One of the most basic estate planning tools is a revocable living trust.  A revocable living trust is an amendable and terminable contract, entered into by a single person or married couple during their lifetime, to provide for the management of their financial affairs for the remainder of their life and beyond death.

There are generally five major parts to a revocable living trust.  An introductory section in which the trust is declared to be created, your family is identified and the trust is funded.  A section that addresses what happens during your lifetime.  A section that addresses what happens at your death.  A section that addresses matters relating to your Trustees.  And, finally, a section that addresses general and administrative matters.

Revocable living trusts are frequently used to avoid probate and provide a means by which a person’s property can be managed in the event of his or her disability and upon death.  Property owned by the trust is not subject to probate because it is not owned by you at your death.  Property left to the trust by beneficiary designation is likewise not subject to probate because of the beneficiary designation.  For high net worth clients (clients whose net worth is over $5.49 Million) a revocable living trust can also be used to eliminate or reduce estate taxes.

Think of a revocable living trust as an entity you create to manage your personal financial affairs.  You are both the Trustmaker and the Trustee.  As Trustmaker, you establish the rules pertaining to the operation of the Trust.  As Trustee, you agree to follow those rules.  You appoint others to serve as Successor Trustee if you become disabled and at your death.  They agree to follow the same rules and carry out the purposes for which the Trust exists at that point in time.  If you become disabled, the trust exists for the purpose of taking care of you.  When you die, the trust exists for the purpose of paying your bills and carrying out the distribution of your property to your beneficiaries, much as you might have done in your Will.

While you are alive and well, you can do anything you want with property in your trust.  You are in complete control.  You can invest your money any manner you want.  You can decide what bills to pay and which to contest or put off paying.  You can amend the terms of the trust at any time and from time to time or revoke it altogether.  The trust cannot be changed without your approval, but nothing is cut in stone until your death.

Revocable living trusts are often used in the estate plans of married couples with minor children; single persons and married couples with many beneficiaries, many parcels of real estate, or a closely held business.  The primary reason for this is that the trust avoids probate and centralizes the management of your property in more complicated situations.

"Revocable living trusts are frequently used to avoid probate and provide a means by which a person’s property can be managed in the event of his or her disability and upon death. "

Power of Attorney

A Power of Attorney is a document you use to appoint someone to handle your affairs for you if you become legally disabled.  In those estate plans that do not include a revocable living trust, a General Durable Power of Attorney is often used.  This document grants a person of your choice the power to do virtually anything that you yourself could do in virtually any situation.  You cannot, however, give anyone authority to make a will for you or to vote in an election for a candidate.

In those estate plans that include a revocable living trust, we usually recommend using a “Special” Durable Power of Attorney.  This document authorizes a person of your choice to handle a limited number of things that fall outside the authority of the Trustee of your trust.  Those things include transferring property to the trust, managing life insurance and retirement plans, signing tax returns, applying for government benefits and obtaining medical information.  If you have a trust, the day-to-day management of your finances and payment of your bills is handled by the Trustee under the authority granted him or her by the trust.

"A Power of Attorney is a document you use to appoint someone to handle your affairs for you if you become legally disabled. "

The Healthcare Power of Attorney

A Healthcare Power of Attorney is a document you can use to appoint a person to make health care decisions for you when you are unable to make them for yourself.  (If you are able to make and communicate health care decisions yourself, the law requires you to make them.) This document is designed to work in tandem with the Medical Directive when dealing with decisions concerning feeding tubes and respirators.  Your healthcare power of attorney is authorized to make routine healthcare decisions for you as well as decisions about whether to put in a feeding tube or “pull the plug” on a respirator.

"Your healthcare power of attorney is authorized to make routine healthcare decisions for you as well as decisions about whether to put in a feeding tube or “pull the plug” on a respirator. "