Basics of Estate Planning: Part I, Everyone Needs It

In my many years as a Banker, I’ve seen bad situations of individuals who did not do any Estate Planning. They leave behind accounts that no one can access, and a family that often does not know what they have, where it is, or how to go about distributing it. Worst of all, they don’t know what their loved one’s wishes were. Often people tell me they don’t really own anything significant, so they don’t need to plan for what will happen upon their death. “I don’t own a house or have any children, so there’s nothing to inherit and no one to leave it to.”

I am not an attorney, and therefore cannot offer legal advice. For complicated situations, or specific legal questions, you should always seek legal counsel. This is just some guidance as to what I’ve learned over the years. I’ve seen what can happen when someone dies without having done any planning, and I can see how things move much more smoothly when an appropriate plan has been implemented. This is part I of a series, so let’s begin by talking about why it’s important for everyone to think about Estate Planning.

Estate Planning is a fancy phrase that simply means ensuring that things will happen as you want them to when you die, or if you become incapacitated. This involves passing on property, determining wishes regarding children or others dependent on you, stating burial and memorial service wishes, and making wishes known regarding what happens if you can’t make decisions for yourself. Putting your wishes down on paper also makes it much easier for the people you leave behind to get through what is likely to be a difficult period. Mourning is hard enough without also trying to navigate the complicated world of distributing or transferring assets, especially without an understanding of what the deceased would have wanted. So do you need to do some Estate Planning?

You Need to do Some Estate Planning If:

• You own any property including real estate, a business, vehicles, cash, investments, life insurance, collectibles, antiques, furniture, jewelry, family heirlooms, books, tools, even clothing, dishes, photographs, or equipment
• You have children, especially minor children (or others who rely on you financially or physically)
• You have wishes about what happens if you are incapacitated, or wishes about memorial services and/or burial when you die
• You have family rifts that might cause arguments over distribution of assets
• You are in a second relationship, especially with a blended family
• You want to make things easier for your loved ones upon your passing

Basically: Everyone. Many of us can manage the process of Estate Planning on our own and hiring an attorney to do it for you can be expensive.  There are a lot of tools available online for both advice, and sample forms. Some online tools will assist with form completion for a small fee. If you do attempt to do your planning on your own, be sure to review your state’s guidelines for what makes a document legal. For example, in Massachusetts, a Living Will (see below for definition) is not accepted as a legal document and your doctor will not use it to direct your health care decisions. However, it will still give your family guidance in these situations. Also, some documents will need to be notarized to be considered legal, and others will not. You can check this information by searching for a topic and then choosing a state-sponsored site for the legal answers that apply to you.

What are the possible pieces of Estate Planning? Here are some of the most common documents that are found as part of an Estate Plan. I will address each of these items separately in future segments of this Estate Planning series. Not all of these will apply to your situation.

• Will
• Account Titling provisions (UTMA, POD, beneficiaries, joint owners)
• Living Trust
• Health Care Directives
• Power of Attorney
• Funeral/Memorial/Service Planning
• Organ Donation instructions

Some Estates are obviously more complicated and will certainly require professional advice from an attorney who practices Family Law or Estate Law, particularly if any of these scenarios apply to you:

• You live in a Common Law State and are unsure how these laws apply to you
• You fear a lawsuit, or think your wishes might be contested
• You own multiple properties or multiple businesses, especially with complicated ownership
• You have a lot of assets, or high dollar assets
• You have out-of-state, or out-of-country assets
• You want to protect your assets from estate taxes, creditors, or potential medical expenses
• You have complicated child care concerns

So what happens if you die with no Estate Planning put into place? If you die and have made no provisions for what will happen when you die, you have basically given up the right to decide who oversees your estate, and what happens with it. Consequences will be out of your control, and possibly out of the control of your loved ones. Your next of kin will need to complete an application to be appointed as the Personal Representative of your estate, which will allow them to handle assets in your estate.  This process is known as probate, and can take months. During this time, assets without clear ownership will not be able to be accessed, and bills may go unpaid. Even after a personal representative is appointed, without a Will the state still gets to make the decisions as to how your assets are distributed, in most cases going to your nearest relative, which might not be what you would have wanted. Dying without a Will is called “Intestate,” and scenarios differ from state to state but could include family members ending up with nothing, having serious tax consequences, or even being kicked out of their homes.

Estate Planning is not something you do once and then forget about. You can–and should–review your Estate planning every couple of years to see if changes are needed based on your current situation. You can update any of the documents in your Estate Planning as often as you need to.

Here are some common terms and definitions that you’ll hear in connection with Estate Planning.

Personal Representative– The court appointed administrator of a deceased person’s estate, possibly named in a Will

Probate– A legal process by which the court determines how to distribute a deceased person’s assets; this can happen with, or without a Will

Will (or Last Will and Testament)– A legal document where an individual outlines their final wishes regarding their property and dependents after their death

Living Trust– A formal written document that allows property in the name of the Trust, to pass to beneficiaries without probate

Beneficiary-A person who receives money or benefits, usually following the death of the original owner

Contingent Beneficiary-A second level beneficiary who only obtains benefits if the primary beneficiary dies before, or at the same time, as the original owner

Health Care Directives-Written instructions put into place that outline a person’s wishes regarding what they would, and would not, like for medical intervention in the event that they are unable to make these decisions for themselves; a health care directive might also name an individual to make these decisions for them

Living Will-A document describing what kinds of treatments an individual would, and would not, like to have in the event they are unable to make these decisions for themselves

Health Care Agent-also known as a Health Care Proxy-is a person appointed by an individual to make health care decisions for them should they become incapacitated

Stay Tuned for Estate Planning, Part II, The Will.