What is estate planning?
When someone passes away, his or her property must somehow pass to another person. In the
United States, any competent adult has the right to choose the manner in which his or her
assets are distributed after his or her passing. (The main exception to this general rule involves
what is called a spousal right of election which disallows the complete disinheritance of a
spouse in most states.) A proper estate plan also involves strategies to minimize potential
estate taxes and settlement costs as well as to coordinate what would happen with your home,
your investments, your business, your life insurance, your employee benefits (such as a 401K
plan), and other property in the event of death or disability. On the personal side, a good estate
plan should include directions to carry out your wishes regarding health care matters, so that if
you ever are unable to give the directions yourself, someone you know and trust can do that for
Why is it important to establish an estate plan?
Sadly, many individuals don’t engage in formal estate planning because they don’t think that
they have “a lot of assets” or mistakenly believe that their assets will be automatically shared
among their children upon their passing. If you don’t make proper legal arrangements for the
management of your assets and affairs after your passing, the state’s intestacy laws will take
over upon your death or incapacity. This often results in the wrong people getting your assets
as well as higher estate taxes.
If you pass away without establishing an estate plan, your estate would undergo probate, a
public, court-supervised proceeding. Probate can be expensive and tie up the assets of the
deceased for a prolonged period before beneficiaries can receive them. Even worse, your
failure to outline your intentions through proper estate planning can tear apart your family as
each person maneuvers to be appointed with the authority to manage your affairs. Further, it is
not unusual for bitter family feuds to ensue over modest sums of money or a family heirloom.
What does my estate include?
Your estate is simply everything that you own, anywhere in the world, including:
-Your home or any other real estate that you ownYour business
-Your share of any joint accounts
-The full value of your retirement accounts
-Any life insurance policies that you own
-Any property owned by a trust, over which you have a significant control
How do I name a guardian for my children?
If you have children under the age of eighteen, you should designate a person or persons to be
appointed guardian(s) over their person and property. Of course, if a surviving parent lives with
the minor children (and has custody over them) he or she automatically continues to remain
their sole guardian. This is true despite the fact that others may be named as the guardian in
your estate planning documents. You should name at least one alternate guardian in case the
primary guardian cannot serve or is not appointed by the court.
What estate planning documents should I have?
A comprehensive estate plan should include the following documents, prepared by an attorney
based on in-depth counseling which takes into account your particular family and financial
A Living Trust can be used to hold legal title to and provide a mechanism to manage your
property. You (and your spouse) are the Trustee(s) and beneficiaries of your trust during your
lifetime. You also designate successor Trustees to carry out your instructions in case of death
or incapacity. Unlike a will, a trust usually becomes effective immediately after incapacity or
death. Your Living Trust is “revocable” which allows you to make changes and even to
terminate it. One of the great benefits of a properly funded Living Trust is the fact that it will
avoid or minimize the expense, delays and publicity associated with probate.
If you have a Living Trust-based estate plan, you also need a pour-over will. For those with
minor children, the nomination of a guardian must be set forth in a will. The other major function
of a pour-over will is that it allows the executor to transfer any assets owned by the decedent
into the decedent’s trust so that they are distributed according to its terms.
A Will, also referred to as a Last Will and Testament, is primarily designed to transfer your
assets according to your wishes. A Will also typically names someone to be your Executor, who
is the person you designate to carry out your instructions. If you have minor children, you
should also name a Guardian as well as alternate Guardians in case your first choice is unable
or unwilling to serve. A Will only becomes effective upon your death, and after it is admitted by
a probate court.
A Durable Power of Attorney for Property allows you to carry on your financial affairs in the
event that you become disabled. Unless you have a properly drafted power of attorney, it may
be necessary to apply to a court to have a guardian or conservator appointed to make decisions
for you during a period of incapacitation. This guardianship process is time-consuming,
expensive, emotionally draining and often costs thousands of dollars.
There are generally two types of durable powers of attorney: a present durable power of
attorney in which the power is immediately transferred to your agent (also known as your
attorney in fact); and a springing or future durable power of attorney that only comes into effect
upon your subsequent disability as determined by your doctor. Anyone can be designated, most
commonly your spouse or domestic partner, a trusted family member, or friend. Appointing a
power of attorney assures that your wishes are carried out exactly as you want them, allows
you to decide who will make decisions for you, and is effective immediately upon subsequent
The law allows you to appoint someone you trust to decide about medical treatment options if
you lose the ability to decide for yourself. You can do this by using a Durable Power of Attorney
for Health Care or Health Care Proxy where you designate the person or persons to make such
decisions on your behalf. You can allow your health care agent to decide about all health care
or only about certain treatments. You may also give your agent instructions that he or she has
to follow. Your agent can then ensure that health care professionals follow your wishes.
Hospitals, doctors and other health care providers must follow your agent’s decisions as if they
were your own.
A Living Will informs others of your preferred medical treatment should you become
permanently unconscious, terminally ill, or otherwise unable to make or communicate decisions
regarding treatment. In conjunction with other estate planning tools, it can bring peace of mind
and security while avoiding unnecessary expense and delay in the event of future incapacity.
Some medical providers have refused to release information, even to spouses and adult
children authorized by durable medical powers of attorney, on the grounds that the 1996 Health
Insurance Portability and Accountability Act, or HIPAA, prohibits such releases. In addition to
the above documents, you should also sign a HIPAA authorization form that allows the release
of medical information to your agents, your successor trustees, your family and other people
whom you designate.