An Introduction to Estate Planning

An estate plan ensures that:

• Assets are distributed according to your wishes.
• Guardians are appointed for minor or disabled adult children and elderly parents.
• Plans exist in the event that you become disabled or incapacitated.

Generally, you are going to want to have five documents to start that ensure your wishes are legally executed in the event of your death and protect you in the event of a catastrophic medical issue.

• Your Will
  • Specifies the beneficiaries who will inherit your assets and names a representative to administer the estate and be responsible for distributing the assets. For parents of minor children, you would also use this document to name a guardian at your passing.¹
• Healthcare Proxy/Healthcare Power of Attorney
  • Different names, same document. Appoints an individual of your choice to make healthcare decisions if you are incapacitated. If you do not have a healthcare power of attorney and you become incapacitated, a petition will need to be filed with the appropriate court to appoint a guardian to make healthcare decisions.²
• Living Will
  • Your written requirements about how you want to be treated in certain medical circumstances. A living will takes the decision to remove life support out of the hands of family members during a very emotional time by setting forth your wishes in advance.³
• Power of Attorney
  • Authorizes a person of your choice to act in your place as an agent in legal and financial matters. Your agent will be able to act on your behalf by paying bills, making investment decisions, handling tax and real estate matters, depositing money and transacting other personal matters you would otherwise have handled yourself.⁴
• Letter of Instruction/Letter of Intent
  • Different names, same idea. Informal, non-legally binding letter you can write to communicate information that isn’t in your will.⁵

In order to create and formalize your plan, here are some simple estate planning tips and a process to follow.⁶

1. Inventory Your Assets & Liabilities
   • Review and itemize everything you own: home, furnishings, cars, jewelry, art, retirement accounts, personal accounts, insurance policies. Pull together and total your debts as well, including mortgages, credit lines, and car loans.
2. Plan for Your Family’s Needs
   • Who should care for your minor children? What will their educations cost? Do you have disabled siblings, elderly parents? You need to make plans for them. Plus, who should get your assets and in what percentages or fixed amounts? In planning for these needs, you might want to consider a trust, which can protect and preserve those assets. “If you establish a trust, you need to make sure your assets are retitled into the name of the new trust entity. If the assets are not retitled, the trust document will not have legal authority over the asset(s),” advises Lonchena.
3. Establish Directives
   • Who should distribute your assets? Who will make decisions for you if you are incapacitated by accident or disease? Your partner/spouse/adult child may not be the right person for these, and you may want to consider a professional fiduciary. Many people choose to name a professional fiduciary because it has a staff of advisors with the skill and knowledge to continuously serve as a fiduciary. Many of those who feel an individual will be their best choice initially will name a corporate fiduciary as their last in line to prevent gaps in the administration of the estate or trust if unforeseen events occur.
4. Make a Beneficiaries List
   • Who are the people you’re assigning assets? What is their contact information? Keeping this list up to date makes the eventual distribution of those assets easier.
5. Create a Letter of Instruction/Intent
   • This informal letter (not a legal document) is your way to supply information that wouldn’t be in the will. You can organize your thoughts, provide locations of assets, supply passwords and PIN numbers for accounts, contact information for key professionals, instructions for re-homing pets, and more. It isn’t a required document, but it can make the work of your executor much easier.
6. See an Estate Planning Attorney
   • While there are DIY estate planning options out there, when it comes to matters as important as these, it’s best to work with an attorney that specializes in this area. If your planning is even slightly complex, a professional is a smart choice.
7. Review Insurance Coverage
   • Life insurance can help with paying estate taxes, and be a financial lifeline so your family can take care of funeral costs after your death. It can also be useful to supplement income lost by the death of a spouse.

From making sure that someone with access knows the estate planning documents are in the bottom drawer of the desk in the second bedroom… to preparing beneficiaries that the beloved family vacation house is to be sold and the proceeds distributed… to ensuring your first-born son gets the painting by Aunt Emma, make sure you cover every base.

“One of the most important things to remember is not to put your original will in a safety deposit box that your executor does not currently have access to. Your personal representative will need the original will to be appointed,” advises Lonchena.

Surprise! There are many circumstances that can affect an established estate plan. Lonchena shared that most people do not revisit their plan often enough, saying, “It is not a ‘set it and forget it’ approach; laws change, family situations change. The key is to have regular check-ins with your documents to make sure they still work for you and your family and provide flexibility with any possible change in the laws.”

Unexpected changes can include:

1. Relationship Changes. Marriage, divorce, birth, and adoption can trigger the need to make changes to your estate planning documents. 
2. Asset Changes. Changes in the value of assets over time (i.e., receipt of a large inheritance) will impact planning. Tax consequences will differ depending on the value of the estate. 
3. Special Needs Planning. Many individuals are faced with caring for an elderly parent or disabled sibling. This will impact how you may want to draft a plan to care for individuals that need care when you are gone. 
4. Change of Circumstances. The individuals (i.e., trustees, executors) you have chosen in your documents to carry out your wishes may no longer be the same individuals you would choose today. 
5. Digital Assets. An emerging area of concern is the possession of digital assets (i.e., domain names, electronically stored photos and videos). It can be important to plan for these assets by keeping a list of passwords and considering the use of a digital asset trust to allow for access to these assets when needed. 
6. Tax Law Changes. State and federal law changes can impact your estate planning documents and merit additional legal strategies for the disposition of assets. 
7. Change of Location. Different states have different laws governing disposition. If you move to a different state, it is important to update your will to ensure that the laws of the state where you currently reside will not alter the disposition of your estate plan. 

Plan to reassess on a regular basis – you don’t want to be in reaction mode constantly because no one plans well in those circumstances. Once every three to five years is reasonable, during quarterly or annual financial planning with your wealth advisor, or after any life event.

To be certain your documents comply with state and federal laws, you may want to hire an estate planning attorney, also known as an estate lawyer. These lawyers specialize in wills, trusts and estate planning, and can answer all your estate planning questions with personalized advice. Other reasons you might hire an attorney include:

• Having a large or blended family
• Having children who are minors or family members with special needs
• Thinking a family member may contest your will
• Owning a family business or investment properties
• Wanting to create a trust
• Having assets in other states or countries
• Being worried about estate or inheritance taxes⁷