While nobody wants to think about death or disability, establishing an estate plan is one of the most important steps you can take to protect yourself and your loved ones. Proper estate planning not only puts you in charge of your finances, it can also spare your loved ones of the expense, delay and frustration associated with managing your affairs when you pass away or become disabled.
Providing for Incapacity: If you become incapacitated, you may be unable to manage your own financial affairs. Many are under the mistaken impression that one’s spouse or adult children can automatically take over for them if they become incapacitated. The truth is that in order for others to be able to manage your finances, they must petition a court to declare you legally incompetent or otherwise unable to manage your own affairs. This process can be lengthy, costly and stressful. Even if the court appoints the person you would have chosen, the individual may have to come back to the court every year and show how he or she is spending and investing each and every penny.
Many also mistakenly believe that a simple will can effectively protect you in the event that you become incapacitated. However, this is incorrect. A will does not take effect until you die. If you would like a family member to be able to immediately take over managing your affairs for you in the event of your incapacity, it is essential that you execute, in advance, the proper legal documents to effectuate your wishes. For example, through a validly executed a durable power of attorney, It is possible for you to grant a person or persons the authority to be able to withdraw money from your bank accounts, pay bills, take distributions from your IRAs, sell stocks, and refinance your home, among other things.
In addition to planning for the financial aspect of your affairs in the event of your incapacity, it is also critical that you establish a plan for your medical care. The law allows you to appoint someone you trust such as a family member or close friend, to make decisions on your behalf about medical treatment options if you lose the ability to decide for yourself. Through a validly executed health care directive, you designate a person to make such decisions on your behalf. In addition to a health care directive, you may also want to consider executing a living will, which informs others of your preferred medical treatments, including the use of extraordinary measures should you become permanently unconscious or terminally ill.
Providing for Minor Children: It is important that your estate plan address issues regarding the upbringing of your children. If your children are young, you may want to consider implementing a plan that will allow your surviving spouse to devote more attention to your children, without the burden of work obligations. You may also want to provide for special counseling and resources for your spouse, if you believe they lack the experience or ability to handle financial and legal matters. You should also discuss with your attorney the possibility of both you and your spouse dying simultaneously, or within a short duration of time. A contingency plan should include a list of persons you would like to manage your assets and name a guardian that you would like to nominate to raise your children in your absence. Otherwise, the decision as to who will raise your children and manage their finances will be left to the court. The person, or trustee, in charge of the finances need not be the same person as the guardian. In fact, in many situations, you may want to purposely designate different persons to maintain a system of checks and balances.
You should give careful thought to your choice of guardian, ensuring that he or she shares the values you want instilled in your children. You will also want to give consideration to the age and financial condition of a potential guardian. Some guardians may lack child-rearing skills you feel are necessary. If you fail to plan, the decision as to who will manage your finances and raise your children will be left to a court of law.
Another issue to consider during the planning process is whether you would like your beneficiaries to receive your assets directly, or to have the assets placed in trust and distributed subject to conditions and circumstances such as age, need and even incentives based on behavior and education. All too often, children receive substantial assets before they are mature enough to handle them in a prudent manner.
Planning for Death Taxes: The IRS will want to review your estate at death to ensure you don’t owe them that one final tax: the federal estate tax. Whether there will be any tax owed depends on the size of your estate and how your estate plan is structured. Many states have their own separate estate and inheritance taxes that you need to be aware of. There are many effective strategies that can be implemented to reduce or eliminate death taxes, but you must start the planning process early in order to properly implement many of these strategies. Our FirmEstablishing an estate plan is one of the most important steps you can take for you and your loved ones. The Law Office of Cheryl Gabes Rice, LLC strives to educate clients on the many details involved in estate planning. We listen to our clients, taking time to understand their personal situations in order to determine how best to achieve their estate planning goals. Regardless of the complexity of a client’s estate plan, our emphasis is always on working closely with our clients to create an estate plan that thoroughly encompasses their wishes and achieves their personal needs and objectives. For frequently asked questions about estate planning, click here. For frequently asked questions about planning for incapacity, click here. |