What is an estate plan?
We commonly encounter two responses to this question:
- Complete unfamiliarity, or
- Dangerously inaccurate familiarity (because there’s a big binder at home the family refers to as the “trust”),
This overview of what an estate plan actually entails, and what an estate plan’s purpose really is, should provide a clearer picture.
Do I have an estate? Do I need a plan?
From time to time, we meet a client who has never come into contact with this area of law and therefore believe that it is unnecessary for them to think about. “I don’t have an estate,” they say, and we just know they are imagining a gardened villa on a beautiful piece of land. This is not what an estate is, nor do one’s assets (whatever they are or however much there are), determine whether or not someone needs an estate plan. Rather, personal capacity—the very ability to make legal decisions for yourself related to their finances and healthcare—is one of the most valuable assets we each have. This asset absolutely should be planned for in an estate plan.
But let’s return to our initial question: What is an estate plan?
An estate plan is a set of legal documents that, when prepared carefully and correctly, should address all kinds of potential scenarios that could otherwise result in the loss of time and money, and worst of all, the destruction of family relationships. An estate plan would usually include various powers of attorney to cover financial and medical aspects of decision-making in case the Principal (the person for whom the plan is being created) ever loses capacity.
Without these powers of attorney in place, the only legal way for others to make these kinds of decisions on behalf of the Principal, especially on a longer-term basis, is by obtaining a guardianship/conservatorship, which are legal actions that have to be filed with the court. People may be more familiar with the term “probate” and they know they want to try to avoid that because it can be unnecessarily expensive and drawn out. Guardianship/conservatorships are essentially just like probate, but they apply while the Principal is still alive, whereas probate is the process by which the court oversees the distribution of assets that are left after the Principal’s death.
It is generally better to avoid guardianship/conservatorships, because the funds used to pay the attorney’s fees and expenses associated with these unexpected processes come out of the Principal’s own assets while they are still alive. Having a proper estate plan means avoiding this waste.
What does an estate plan include / address?
A proper estate plan generally will also include the appropriate documents that: 1) address the distribution of assets remaining at the Principal’s passing, 2) name the right people to serve as Personal Representative (Executor) and/or Successor Trustee, and 3) cover all sorts of potential challenges, such as:
- What if your primary beneficiaries are not alive at your death?
- What if your primary beneficiaries are collecting government benefits and your gift to them would interfere with that in a way that would actually be detrimental to them?
- What if your primary or contingent beneficiaries are minors and cannot legally inherit at the time of distribution?
- What if one of your primary or contingent beneficiaries has a substance abuse issue?
- And many other imaginable scenarios.
In some estate plans, a Trust is the more appropriate document for addressing these issues, and in others, a Will, as well as the right types of deeds and beneficiary designations, may be the right way to go.
Our Estate Planning Goals for You Always Include:
- avoiding court supervision and fees;
- maintaining peaceful and healthy family relationships;
- identifying and planning for pitfalls that can lead to issues down the road; and
- creating a plan that will last and be as simple and cost-effective as possible to execute.
Working with a professional means you should be having a very broad, yet in-depth, conversation about various aspects of your life as it relates to these topics. A true professional will ask you the hard questions and help you come up with answers that result in a truly functional, practical estate plan. Then, if and when the time comes to execute, the estate plan works smoothly and for the benefit of you, the Principal, and your loved ones.
