October 14, 2009

Estate planning is an act of love and kindness

By Julie Filby

Estate planning can be defined as the process of arranging for the orderly disposition of assets after your death. Not a real warm and fuzzy definition. However, setting up an estate plan can be considered your final act of kindness and friendship.

By preparing for the protection, conservation and distribution of your assets, not only are you providing for your loved ones—you are helping to alleviate stress for them at an already difficult time. If you don’t plan in advance, someone is going to be left to deal with difficult legal, financial, and often emotional issues.

Estate planning can include setting up a will, providing for minor children, setting up a power of attorney and specifying wishes regarding health-care treatment.

It’s not only for the wealthy
Without a comprehensive plan, a significant part of the work you have done throughout your life, both with your career and your savings, can be lost or given to unintended beneficiaries.
Estate planning is not only for the affluent. A large or complicated estate may include detailed tax planning and corporate reorganization, while a couple of modest means may simply need life insurance and joint ownership of property. Generally an attorney, and often an accountant, is needed for estate settlement. You are likely to find the expense of retaining a qualified attorney is worth it compared to what your family could pay with no planning or poor planning.

Start the discussion
Planning generally starts with a conversation—this may be between a husband and wife, a father and son, or one friend to another. It can be difficult conversation to initiate because discussing death makes most of us uncomfortable.
As uncomfortable as it may be, talking about worst case scenarios won’t make them come true—and refusing to talk about them won’t make them go away. Ignoring the inevitable will only leave you unprepared. Most likely, the conversation will be a welcome relief.

Two sides: financial, personal
From a financial standpoint, an estate plan coordinates what will happen with assets in the event of disability or death. Financial assets include but are not limited to:
• Real property and things attached to it (houses, buildings, barns)
• Investments (stocks, bonds)
• Bank accounts (checking, savings)
• Businesses and business interests
• Real estate (rental property, office, land)
• Life insurance and related products
• Employee benefits (such as a pension plan)
• Tangible, personal property (such as jewelry, art or collectibles)
In addition to financial assets, there are likely items while not financially valuable, hold sentimental value. To make sure those items end up with those who will appreciate them most, draft a separate personal inventory.
A sound plan will also include directions to carry out wishes regarding health-care matters, and appointment of guardians for minor children. This may be the most important part of your will if you have minor children.

Planning tools
Below are the primary documents used in an estate plan.
Will: The instructions for transferring property from you (the owner) to the beneficiary (the person you want to receive it). A will becomes effective only upon death and after it is admitted to probate. A will typically names a personal representative (sometimes called an executor) who is responsible for settling the estate. That person is legally obligated to carry out the instructions in the will.
Medical Durable Power of Attorney: Appoints a person to make decisions regarding health-care treatment in the event you are unable to provide informed consent.
Durable Power of Attorney for Property: Appoints a person to handle financial matters if you become unable or unavailable to do so. There are two types: standing and springing. Standing gives the agent authority to act the instant the document is executed. Springing becomes effective only upon a triggering event such as the medical provider signing a written opinion that the principal is unable to make informed decisions.
Living Will (or Declaration as to Medical or Surgical Treatment): Unlike a power of attorney, this does not appoint an agent to make medical decisions. Instead, it simply states that if certain conditions exist, life-sustaining measures are to be withdrawn.

This article is not meant to provide legal advice. Please consult an attorney for advice specific to your situation.