Written by Robert T. Nickerson
Have you ever seen an ad for estate planning and thought, “There’s no way I could ever afford something like that”? You’ve probably seen a lot of stories about the wealthy that’ve spent a lot on lawyers in order to have their assets prepared for their family. I’ll tell you immediately that you don’t need to be Jeff Bezos or Elon Musk to plan for your future. Estate planning is not just for the wealthy. What is important is having the right documents prepared so that your family will be ready when your gone. Not to sound downbeat, but at some point, we will die and we do need to make sure our loved ones don’t face problems with the court or government with what you’ve left behind. I’ve helped a lot of families navigate over what to do with properties, financial assets, and even the guardianships of their children. But rather then give you an entire course on the technical aspects of estate planning, I thought I would go through six essential documents every adult should have in order to help their loved ones get an idea with what you would want. While some don’t need to be touched until death, some of these could come in handy for medical emergencies.
Durable power of attorney
Here’s something that can be used for a lot of circumstances when your still alive. Should you become incapacitated for any reason, a durable power of attorney allows you to select someone you trust to make all legal and financial decisions in your name. They can pay bills. They can setup lawsuits. There’s a lot they can do to save a lot of time.
More importantly, they prevent families from arguing over who should be your voice. Without it, this would force families to go to court to have a conservator appointed, which along with being a very expensive and time consuming process, may not have your best interest. That’s not to say their all bad, but they go off from an idea of probably what you would want. These are the kind of decisions that are better suited for trusted love ones.
This is similar to a power of attorney, except this is in the case for potential medical decisions. Let’s say you’ve gotten into a bad accident are in a coma. You have no way to let the medical team of what you want to happen in any scenario. This document ensures that someone you trust will make those choices. It can even say whether or not you wanted your life to continue should something awful really happen.
Without this document, no one in the family may be allowed to step in, and in some states, may even require a guardian which is just as time consuming as acquiring a conservator.
There’s a lot of confusion with a lot of people assuming that a will can do whatever you want. While it’s sort of true, let’s clear some things and explain what it really is. A will actually dictates what is to happen with your owned assets. It doesn’t have anything to do with guardianship or special trusts.
With a will, you’ll need an executor that’ll take charge on how your assets are divided within the people you’ve selected. This person is also responsible for paying any bills, preparing a tax return and even preparing an estate plan return.
So you want to avoid probate court? Then a revocable trust is going to be key to do so. This does the same thing a will does, but with a lot more advantages. First, it remains a private document (while a legal will is publicly available). Second, if you own any out of state property, then a revocable trust would let you avoid the probate process in that state. Third, this would allow for an easier process for guardianship. This gives the subject more power on how their assets would be distributed to their children.
A revocable trust also makes things easier for a successor to step in to manage the trust rather then waiting for a financial institution to do so.
This is something that comes with a will or a revocable trust. A beneficiary designation is how a retirement account and life insurance is distributed. This is also something that needs to be reviewed at least once a year as a lot of circumstances can change this. Death, marriage and divorce are just some of the things that can cause course to change. There have been horror stories of ex-spouses that have sued, claiming an entitlement to ones assets.
Under the SECURE act, a beneficiary designations have changed. It varies, but in most cases, it’s no longer possible to distribute a retirement account asset over a lifetime.
Guidance Letter to Family
Though this isn’t necessarily a legal document, if you wanted to add a personal touch, a guidance letter is a great way to first give an idea of what you would want to happen. You can use the legal documents to fully iron out the details of your wishes, but a letter is a nice way to give out some guidance in your own language, giving your family more comfort in the way they remember.
Jeffrey C. Nickerson - Estate Planning Attorney - My Passion is Special Needs Planning!