Estate planning isn’t about how much money you have, it’s about protecting what you have for you, during your lifetime and for those you love after you’re gone.  It ensures what you have gets to the people you love, the way you want, when you want.

If you were to die today, are you comfortable everything will be taken care of the way you wanted? Estate planning is legally ensuring things will be handled the way you want by providing sufficient instructions.

Estate Planning really is for everyone.  It doesn’t matter if you have $400 or $400,000.  You still have to plan for the future.  Whether it’s to name a guardian for your minor children or ensure your children don’t blow through your assets if you unexpectedly die or become disabled.

Estate planning can only be done by attorneys, and it can be as simple as a Will, Health Care Documents, Living Will and Power of Attorney.  It can also include a revocable trust, asset protection trusts, multi-generational tax-saving trusts, tax-saving charitable trusts, private family foundations, and many other fact-specific strategies.

Once completed, your estate plan should be reviewed and kept current with life events such as the birth, death, marriage or divorce of anyone included in your plan. In addition, you should review your plan if there is a significant increase or decrease in your finances or if the laws related to your estate plan change.

Would you have your regular doctor do your heart surgery?  Sounds like a stupid question right?  However, the same could be said for choosing the right attorney for your estate planning.  Unfortunately, the legal profession does not have specialties like the Medical profession.  You have to guess whether your attorney is fully qualified to guide you on your estate planning options.You need a qualified estate planning attorney to draft the legal documents that create an estate plan for you.  A qualified estate planning attorney will work with your financial advisor and accountant to create the best plan for you.

The intricacies around estate, Medicaid and tax planning are extensive.  Not only does the attorney need a thorough knowledge of probate law, estate administration, trust, asset protection and Medicaid laws, they must also have an extensive knowledge of income tax, estate tax, gift tax, generation-skipping tax and excise tax laws.  All of these areas intertwine and have a significant impact on your estate plan.

While general attorneys may have some knowledge of the law and be able to guide you through certain parts of the estate or Medicaid planning processes, they will not be aware of the many exceptions and details an attorney who limits his practice to only estate planning will know.

An attorney, who does traffic court one day, divorce on another, business law on the third day and sues for personal injury on the fourth, will not have the experience and knowledge of the loopholes as an attorney who practices exclusively in estate planning.  If you’re looking for a divorce, find an attorney who focuses on divorce. If you want estate planning, utilize an attorney who focuses on estate planning.

If you own assets in your name alone, they may pass from you to the people you love, as long as you leave a Will.  Without a Will, your assets pass according to the State’s rules, also known as intestacy. The State may not pass your assets to the people you care about.  You should be sure.

Also, you should know that...

  • Assets will pass through your Will to your loved ones if the Will is written properly.
  • In a second marriage, you can properly ensure that children from a first marriage will get their bequest through a properly crafted Will. Leaving everything to a second spouse and hoping that spouse will leave your children from a first marriage a share of your estate is foolhardy. Once assets are transferred to the second spouse, they are under no legal obligation to leave your children anything.
  • You can potentially reduce your estate tax liability by using a trust in a Will.
  • You can protect the ones you love by creating a trust in your Will which can protect that person from creditors.
  • You can protect disabled beneficiaries by creating a Supplemental Needs Trust for them in your Will, which preserves assets for the family, while keeping their eligibility for public benefits.

It is important that you give your family the tools to help you if you cannot help yourself, your children from divorce, or you may protect your children who are not good with money, or those who have other problems, such as addiction or mental illness. Your Will must go through probate - using the courts to divide your property.

A trust is a contract between the Grantor (the person who creates the trust), the Trustee (one who controls the trust) and the beneficiaries (those entitled to benefit from the trust).  You, as Grantor, determine how the trust will be operated by the Trustee and who benefits, how and when.  You can create a trust that permits you to be Trustee and give yourself the right to receive full benefits from it.  This type of trust is typically referred to as a Revocable Living Trust and is often used as a substitute to your Will.  It permits you to keep total control and access to all your assets during your lifetime, and provides for the distribution of your assets to your beneficiaries at your death.  Although Revocable Living Trusts now have to go through a process very similar to Probate, it can avoid probate in two states if you own property in 2 or more states.  Other advantages of Revocable Trusts, when property drafted, can include:

  • Asset protection for your spouse after your death.
  • Special needs planning for disabled beneficiaries.
  • Asset management and protection for children who are not proficient with handling money.
  • Protection of assets from a spouse’s subsequent remarriage after your death.
  • Disability planning in the event you become disabled prior to death.
  • Asset protection for your child if his or her marriage should fail to ensure your assets are not part of a divorce settlement.
  • Keeping your affairs private (as opposed to open for public review in probate).
  • Plan for proper management of your business in your absence.

Very few revocable living trusts provide these benefits. Only a qualified estate planning attorney will know how to incorporate these protections into your plan. While a Revocable Living Trust has many advantages, it does not protect your assets from a nursing home, lawsuits, divorce bankruptcy or other creditors.

Asset Protection is typically done with Irrevocable Trusts. A trust is a contract between the Grantor (the person who creates the trust), the Trustee (one who controls the trust) and the beneficiaries (those entitled to benefit from the trust).  You, as Grantor, determine how the trust will be operated by the Trustee and who benefits, how and when.

While a Revocable Trust permits you to maintain full control (as Trustee) and have access to all your assets (as beneficiary), an Irrevocable Trust, once created, may prohibit your right to control the trust (as Trustee) or have access to your assets, but you get to decide to what extent.

It is a common misconception that irrevocable trusts, once created, cannot be changed. While that is true of many irrevocable trusts created to avoid taxes (tax reduction or avoidance trusts), it is not true of all irrevocable trusts.  An irrevocable trust is a trust you create for the benefit of yourself or others and once created, you, as Grantor, must give up your right to something.

Debtor/Creditor law provides that whatever you can get, your creditors can get.  You can have known creditors (i.e., bank/credit card debt) or unknown potential creditors (unforeseen lawsuits, nursing home, and divorce).  A typical income-only irrevocable trust permits you to receive the income on your assets, but you must give up your right to your principal.  In some irrevocable trusts, you can retain the right to change who gets your assets during your life and after your death, and maintain 100% control of your assets until your mental disability or death (asset protection trusts).

Tax reduction/avoidance trusts are much more restrictive than asset protection trusts.  Typically, you cannot retain any right to control or access any of the assets in an irrevocable tax reduction/avoidance trust.  There are many irrevocable trusts available that are quite flexible and grantor-friendly.  You should consult a qualified estate planning attorney to get counseled on all your options before creating an irrevocable trust.

If you become sick or disabled, either temporarily or permanently, who will make decisions for you?

A Power of Attorney allows you to appoint someone (your Agent) you trust to handle your affairs if you cannot do so. 

If you cannot pay bills, get records or make other decisions, your family will be prevented from helping you get treatment, pay doctors or for Medicare.

If your loved one becomes incapacitated and does not have a Power of Attorney, your family may have to file what is known as a Guardianship Proceeding to obtain guardianship of the incapacitated person. This process involves the Court, several lawyers, doctors and usually costs several thousand dollars. A Power of Attorney might cost a few hundred dollars.

A well drafted Power of Attorney will allow your Agent to preserve your assets in the event that you need nursing home care for your loved ones.

It is important that you give your family the tools to help you if you cannot help yourself.

A Health Care Power of Attorney allows you to appoint an Agent to make decisions on your treatment and your medication, obtain your medical records through a HIPPA waiver, admit you into a care facility and request a Do Not Resuscitate (DNR) Order from a licensed physician.

This document is often coupled with a Living Will, which sets forth your end of life directives. You determine whether you want to be supported with life sustaining machines and whether you want tube feeding and hydration or just to be kept comfortable.