Advanced Estate Planning


What Is an Estate and What Planning Is Involved?

It’s important for you to understand what the word “estate” means so that you do not underestimate the broad scope of the term. The “estate” consists of all the property a person owns or controls. Examples of the more well-known items include personal property, real estate, bank accounts, insurance policies, business interests, certain trust accounts and debts, just to name a few.

While it’s essential to build a plan to see that your property is correctly distributed (according to your wishes) to your beneficiaries in an efficient manner, there’s so much more to estate planning besides just monetary items. Who will take care of your children if both parents are gone? Who will make healthcare decisions for you if you are unable to make them for yourself? What will happen to your pets? Who will handle your outstanding debts? These are just a few of the questions that effective estate planning will uncover and make you think about to protect your loved ones and give them direction in the event you become unable to care for yourself.

Who Needs a Plan?

The popular belief is that only the wealthy need to have an estate plan because they’re most likely to be effected by taxes in the event of death. That statement couldn’t be more untrue, as estate planning consists of much more than just the concern for paying taxes on inherited property and possessions. The reality is that most people age 18 or older have some need in the estate-planning picture. It might be something as generic as a simple “will,” or it might be something extremely important, such as ensuring you have recommended guardians for your small children should something devastating happen to you.

Getting Started – Checklist of Documents

The hardest part about estate planning is motivating yourself to get started. While mortality is not the most pleasant thing to think about, it is a necessity for adults to plan for death. You’ll need to expect to devote anywhere from 24 hours to several days to gather all the data required. You should also expect to set aside several days for document preparation or meetings with attorneys for document drafting, if you choose that route. (For more insight, see Estate Planning: 16 Things To Do Before You Die.)

The estate-planning process is very complex and time-consuming. Having a general idea of the common estate documents available will save you time in gathering the necessary data for the documents that apply more directly to your situation. For instance, if you have no children, guardianship for children in the event of your death will not be a part of your estate plan. Here’s a list of common estate documents:

  •     Information for caregivers and survivors
  •     Will
  •     Durable power of attorney for healthcare
  •     Living will (healthcare directives)
  •     Durable power of attorney for finances
  •     Childcare agreements and instructions
  •     Power of attorney
  •     Trust(s)
  •     Final arrangements
  •     Executor forms

Negative Effects of Failure to Plan

The effects of failing to properly plan your estate will most certainly affect your heirs and loved ones more than you are affected once you’re in your grave. Improper planning can initiate negative feelings among your heirs if you have not properly designated your wishes in writing. It can cause unnecessary probate (court determines distribution of property), which can be costly and time consuming. In some cases, it can leave children, grandchildren and pets in a state of improper or undesired guardianship if you don’t have written documents in place to address this.

Another area of concern should be your healthcare in the event that you cannot make decisions on your own, or what should be done if you are put in an unfortunate situation where life support is required.

Finally, while estate taxes should not be your primary reason for planning, it is another area that should not be overlooked. If improper consideration is given to this area, federal estate taxes can be as high as 35% (for 2011 and 2012), and let’s not forget that some state and local governments will want their fair shake too, depending on state and local law.

Hire an Attorney or Do It Yourself?
No matter if you’ve decided whether you’ll need an attorney to help you draft your estate planning documents or not, it’s a great idea to buy some inexpensive estate planning software. The exercises in the program will point to the information you’ll need to gather and how to organize it in an effective way.

Once you’ve gathered your data, most programs will recommend the documents that are required for your situation. The documents in the software programs are very basic in nature, so for individuals with complicated estate plans, you may want to seek the assistance of a qualified estate-planning attorney. Look for an estate attorney that is board certified in wills, trusts and estates or a member of one of these two professional organizations: AmericanCollege of Trust and Estate Counsel or the National Association of Estate Planners and Councils (NAEPC).

Safeguard and Review Plan

No estate plan is ever finalized. Tax laws, economic conditions, estate exclusions, account values and inflation constantly change and this affects the way estate laws/taxation are implemented.

Material Events that suggest it’s time for a review of your estate plan include:

  •     Marriage or divorce
  •     Birth of a child
  •     Death in the family
  •     Substantial increase/decrease in income
  •     New business venture
  •     Selling a business
  •     Retirement
  •     Health issues with yourself/family member

Material changes in your life should always trigger a review. If nothing major has changed for you, then you should take it upon yourself to review your plan at least once every two years. It’s possible that while changes might not have occurred in your life, your children, grandchildren, or other beneficiaries might have had events occur that affect your plan.

Once your plan is in place, make sure that you’ve made all necessary adjustments to your beneficiary designations, titling of assets, notification to the executor and other property to reflect what is listed in your estate documents. You’ll then want to make several copies of everything. Many estate planners will recommend that you only distribute one original signed copy. However, you should keep a copy in your safe-deposit box, give a copy to your estate executor and keep a copy in a safe place at home. If you elect to use an attorney, they normally keep all the documents on file for you as well.


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