At the heart of this discussion lies thoughts and tasks that many of us, understandably, may find daunting. Thinking about a premature death or inability to make decisions because of incapacity can be overwhelming, and may make procrastinating decisions to address the ‘’who’ and ‘what’ of estate planning seem appealing. In addition, there may be some nervousness about meeting with an attorney.
Yet, the essence of estate planning is a profound act of care and foresight. It’s about ensuring that your loved ones are protected and your wishes are honored. The absence of an estate plan leaves too much to chance, including the risk that state laws will step in to make decisions on your behalf — decisions that may not reflect your desires for your family’s future.
Understanding the hesitation that comes with this territory, we aim to bridge the gap and demystify the process.
Read: 9 Estate Planning Mistakes Wealthy Families Make
What is estate planning?
Estate planning is important for almost every adult, regardless of age. It involves several key components to ensure your wishes are honored in case something happens to you.
Key legal documents comprising an estate plan include:
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A will.
A will, often considered the cornerstone of estate planning, outlines your wishes regarding the distribution of your assets and the care of any minor children upon your passing. It allows you to designate beneficiaries for your possessions, ensuring they are distributed according to your wishes, rather than being left to state laws to decide. A common misconception is that having a Will prevents probate, the court-supervised process of distributing a deceased person’s estate. In fact, a Will is only given legal effect by submitting it to the probate court. -
Medical power of attorney
A healthcare power of attorney or medical power of attorney allows you to designate someone to make medical decisions on your behalf in the event you are unable to do so. It may also include living will-type provisions that express your wishes about medical care or treatments, healthcare providers, and end-of-life care. When considering whom to name as your health care agent, think about the person(s) who would be able to make a decision at a potentially difficult time, and who would respect your wishes regarding medical care. -
Financial power of attorney
A financial power of attorney empowers one or more individuals to make financial decisions on your behalf if you become incapacitated and cannot speak for yourself. This authority can include managing your bank accounts, paying bills, collecting debts, buying and selling real estate, and handling investments, among other financial matters. As a result, it is a very powerful document, and care should be given to the persons you authorize to handle your financial affairs. -
Revocable trust
A revocable trust, also known as a living trust, is a legal entity created to hold ownership of an individual’s assets during their lifetime and to dictate the distribution of those assets after death. The term “revocable” means that the trust can be altered or completely revoked by the grantor/trustor (the person who creates the trust) at any time, as long as they are living and competent. This flexibility allows for changes in circumstances, wishes, or relationships. The trust becomes irrevocable upon the grantor/trustor’s death.
One of the primary benefits of a revocable trust is that it allows for assets to be passed to beneficiaries without going through probate, which was mentioned above. This can save time and money, and ensures privacy regarding the specifics of the deceased person’s estate and beneficiaries, as probate is a public process. Additionally, a revocable trust can provide a mechanism for managing the trustor’s assets should they become incapacitated during their lifetime, by appointing a successor trustee to manage the trust’s assets.
Do I need an estate plan?
As a planning professional with more than two decades of experience advising clients, I believe that every adult should consider creating an estate plan that reflects their own wishes.. The extent of that planning can vary depending on the stage of life of the individual. And, as stated above, if you fail to make your wishes known, state law and/or the probate court in the county in which you live will likely step in and dictate what happens upon your death.
Assuming that you wish to have a say in those decisions, the core estate planning documents of Powers of Attorney (financial and medical), Will, and (possibly) Revocable Trust are detailed above and bear consideration. The following provides thoughts on various stages of life when estate planning may be particularly top-of-mind:
Young adults
Once you become a legal adult (in most states, this means the age of 18), you have the right to control and restrict access to your personal information. Colleges, dental clinics, and medical providers are not able to provide information to the parent of an adult child unless the child authorizes the sharing of information. As the parent of two college students, I am aware of, and support, their right to privacy. However, they would agree that there are times when it is helpful for mom and dad to have some visibility to offer advice and guidance as they navigate the world of banking, credit cards, and medical appointments. In addition, in the event of an emergency, having a legally executed Power of Attorney for financial matters and a Health Care Directive ensures that decisions can be made.
If the young adult does not have significant assets, which is somewhat in the eye of the beholder, they may not view a Will as being as high a priority. However, in today’s digital age, it’s also important to ensure your digital assets are handled according to your wishes. You may want to ensure you assign a digital executor who has the necessary information to access your social media accounts. This might include usernames, passwords, and other required details, kept securely and regularly updated.
Working adults with partners, spouses, and/or minor children
In my experience, many people consider the need for an estate plan more seriously when they identify a partner/spouse and if/when the family expands to include children. Ensuring that beneficiary designations are updated, reviewing the persons named as decision-makers on health care directives and financial powers of attorney, and that attention is given to shifting priorities on who inherits may all be top of mind.
In addition, if children are part of the picture, designating guardians for minor children, safeguarding their future, and ensuring that your loved ones are protected and provided for requires the creation of a Will as part of your estate plan. Without a plan, you leave these critical decisions to state laws or the court, which may not align with your wishes or the unique needs of your family.
Deciding on a guardian for your young children is among the most heartfelt decisions you’ll face in the estate planning process. Recognizing that no one could ever take your place as a parent, your goal is to find the most suitable substitute for their care and custody. The individuals you entrust as guardians might also be considered capable of managing your children’s financial affairs, yet they don’t need to fulfill both roles. It’s important to acknowledge that not everyone possesses the financial acumen required for such responsibility, and that’s perfectly ok.
Should you choose to separate the roles of caregiving from financial oversight, it’s very important to select a person or institution as a Trustee who will act in harmony with the guardians. This Trustee should readily provide for the financial needs of your children, covering a spectrum of expenses from athletic fees and music lessons to school trips and clothing. Ensuring a seamless collaboration between the guardian and Trustee is crucial for a harmonious upbringing of your children, safeguarding their well-being and supporting their interests as they grow.
Powers of Attorney for financial and medical decisions are also important at this stage and at all ages of adulthood. If you have not previously executed these documents, or if it has been a number of years since you last reviewed these important documents, I suggest adding them to the discussion.
Business Owners
For business owners, having an estate plan is not just a matter of personal legacy but can also be critical to ensuring the continuity and stability of the business if an unexpected death should occur. Ideally, the business would have its own succession plan, to provide for the seamless transition of ownership and continuity of management. In the absence of a written document specific to the business, the owner’s estate plan may need to fill the gap. In the absence of clear directives, business operations may be disrupted and create uncertainty among employees, customers, and suppliers. This could lead to a loss of business value and diminished customer confidence.
Empty nesters
Once your children become adults, your estate plan may shift from being an emergency plan to address what happens if you should pass away prematurely, to one that might provide a more proactive approach. You may decide to expand your beneficiaries to include additional family members, such as grandchildren, and potential charitable organizations. It may also address sentimental assets, such as family heirlooms or legacy real estate, as well seek opportunities to reduce the potential for future conflict among children. In the absence of clear instructions, misunderstandings and disputes may occur, giving rise to rifts in the family over the interpretation of your wishes.
An estate plan can help mitigate these risks by specifying your intentions regarding the who, what and when of your estate plan. It serves as a roadmap for your family, guiding them through a challenging period with less stress and more harmony. Additionally, by designating executors and trustees, you ensure that your estate is managed and distributed by individuals you trust, and in alignment with your values and goals.
Where to start your estate planning
When it comes to estate planning, it can feel overwhelming to know where to start. For many, creating an estate plan is their first encounter with an attorney and it can feel a bit intimidating to even select legal counsel, let alone actually meet with them. If choosing an attorney seems too big of a step, start with your wealth advisor. They can help you prepare for that conversation by asking preliminary questions, gathering financial information, and providing the names of attorneys they have worked with in the past that you could consider.
Read: How to Choose a Financial Advisor for Your Family
Ensure your plan stays current
Once you have an estate plan in place, we suggest that you review the provisions of the plan as life events occur or every 3-5 years to ensure that it accurately reflects your current circumstances and wishes. Life is dynamic—major events such as marriages, divorces, relocating to another state, births, and deaths can significantly impact your estate plan.
Failing to regularly review and update your plan can lead to unintended consequences, such as the omission of important people in your life, the inclusion of persons who are no longer part of your intended beneficiaries, increased estate taxes, or complications and delays in the administration of your estate.
Read: Rebuilding Your Future: 7 Keys for Revising Your Estate Plan After Divorce
We are here to help with your estate plan.
If you feel ready to take the first step, we can help you. Let us match you with one of our experienced Wealth Advisors to help you navigate the complexities of estate planning. Think of how much better you’ll sleep ensuring that your legacy is preserved and your family is protected according to your wishes.
