Estate Planning, What Is It?


Volume 7 • Issue 9 • October 2017

The Counselor is a monthly newsletter of Hallock & Hallock dedicated to providing useful information on estate planning, business succession planning and charitable planning issues. This month’s issue will be a general look at what estate planning means. If you are interested in learning more about the ideas and processes discussed in this newsletter, please contact us for an initial consultation.

In recognition of National Estate Planning Awareness Week (October 16-22), this month’s newsletter will be a general look at what we mean when we talk about estate planning. Estate planning is one of the most overlooked areas of personal financial management. The resolution proclaiming the third week in October as National Estate Planning Awareness Week noted that “Many Americans are unaware that a lack of estate planning and financial illiteracy may cause their assets to be disposed of to unintended parties by default through the complex process of probate.” According to many studies, 70% or more of Americans fail to engage in estate planning. That means that more than 120 million Americans do not have proper estate plans to protect themselves or their families in the event of sickness, accidents, or untimely death. This costs many families wasted dollars and unnecessary hardship that can be minimized with proper planning.

What is Estate Planning?

A good estate plan is one that will:

  • control property while you are alive and well;

  • plan for you and your loved ones if you become disabled;

  • avoid probate;

  • give what you have to who you want, the way you want, and when you want;

  • ensure the long term control and protection of property; and

  • leave a legacy for your family.

Estate planning is a process and involves building a relationship between you and your advisory team; it is not merely a single transaction.

So, knowing it is important, what exactly is estate planning?  Nearly everyone has an estate of some kind.  Your estate consists of the assets you own: homes, land, cars, bank accounts, investment accounts, life insurance, or personal possessions.   Be it large, small, or somewhere in-between, you probably have an estate.  Estate planning then is the process of putting in place a plan to address what happens to these assets if you become disabled or when you die.   To ensure that your wishes are carried out, you need to provide instructions on who will be in charge and where things will go and when.

Good estate planning can also address many other issues:

  • Providing a statement of your values (religion, education, hard work, etc.).

  • Providing instructions for your care if you become disabled before you die.

  • Providing protections for minor or disabled children.

  • Providing protections for family members with special needs in order to avoid the loss of government benefits.

  • Providing protections for loved ones who might be irresponsible or who may need protection from creditors or divorce.

  • Providing charitable planning.

What Documents Should I Have in My Estate Plan?

Different documents will address different issues in an estate plan, but every estate plan should include a few basic documents:

  • Living Trust

  • Will

  • Financial Durable Power of Attorney

  • Living Will

  • Medical Power of Attorney

The first choice you will be called upon to make is whether your plan will be founded on a will or a trust.  A will provides your instructions, but it is a death instrument only.  This means it is not effective until you die.  A will must also be probated to be effective.  In fact, in some states, if it is not probated within a certain time it becomes void.  Additionally, if you own property in more than one state, your family may face multiple probate actions.  The cost and complexity of the probate process can vary from state to state, but it can become expensive with legal fees, administration fees, and court costs.  Probate files are open to the public and excluded heirs are given the opportunity to come forward and seek a share of the estate.   Finally, probate usually does not involve all of your assets, this can lead to unintended results if beneficiaries or ownership are not properly coordinated with your will.

A revocable living trust is a step above a will.  It contains your instructions for your own care and the care of your family if you become disabled, as well as for the distribution of your assets upon your death.  Your revocable living trust allows you to keep your instructions and financial affairs private and ensures that your instructions are carried out efficiently without unnecessary judicial involvement.  The trust can avoid probate at death, prevent court control of assets in the event of your incapacity, and provide coordination with non-probate assets.  Depending on the state, a trust can stay in existence for a significant amount of time after your death, or forever in some states.

A financial durable power of attorney is a document where you appoint an agent to act for you in financial matters if you become incapacitated.  This would be for assets not governed by your living trust.  Your agent may be authorized to transfer property to your revocable living trust, to make withdrawals from your retirement assets, or to do anything else that you want your agent to do for you if you become incapacitated.

The living will and medical power of attorney may be known by different names in different states.  Sometimes they are referred to as an Advance Health Care Directive.  These documents help others give you the health care you want when you cannot make decisions or communicate for yourself.  They serve to inform your doctors of who you have appointed to be your Health Care Agent and how to make end-of-life care decisions.  It is important that these documents allow identified persons to obtain protected health information on your behalf in order to make informed decisions about your care and to pay your medical bills.

When Should I Plan?

No one likes to think about their own death or incapacity.  While incapacity may never happen; death most certainly will.  We just don’t know when.   This is exactly why so many families are caught off-guard and unprepared when incapacity or death does happen. Even if you are not 100% sure about a particular choice, you can put something in place right now and if you change your mind, you can change your plan.

Knowing that you have a solid estate plan in place will provide peace of mind to you and your family. This is one of the greatest gifts you can give to yourself and those you love.  We encourage you to use this week to commit to putting an estate plan in place by the end of the year or reviewing and updating your existing plan to make it consistent with your current wishes and situation.

This Newsletter is for informational purposes only and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to any particular issue or problem. Nothing herein creates an attorney-client relationship between Hallock & Hallock and the reader.