Estate planning

Creating your legacy

You created your family wealth, but how can you ensure it passes to the people and causes you love? Planning for any eventuality can provide you and your family with comfort now and a smoother transition when the time comes later.

Foundational documents

Estate planning involves more than planning out your final wishes. It’s also about preparing for a potential transfer of authority in case you reach a point where you cannot take care of your affairs during your lifetime. Estate planning is a comprehensive process that can begin with the foundational documents of wills, revocable living trusts, powers of attorney and health care directives, discussing very generally below.

Last will and testament—This is a legal document in which you appoint the executor of your estate, designate a guardian for your minor children and outline how you want to distribute your wealth.

Revocable Living Trust (RLT)—This functions in much the same way as a will. However, a probate court must administer a will. An RLT may avoid the probate process, saving time and money. It may also offer privacy from the public proceedings of probate.

You fund your RLT, maintain access to the assets, and change its terms and beneficiaries while you have capacity. The trust agreement is your road map and the trustee must follow it. The trustee is a fiduciary, entrusted with control, management and asset distribution for your named beneficiaries.

Financial Durable Power of Attorney (DPOA)—If you ever become incapacitated for a period of time, it is important to have someone authorized to make financial decisions for you. A financial durable power of attorney is the legal document in which you designate your attorney-in-fact to act on non-trust assets.

Medical directive—With an advanced medical directive, you can plan for your medical treatment in advance of needing it. You may preauthorize specific medical procedures or appoint someone to make decisions on your behalf if you are incapable. Advance directives may include a Living Will, Healthcare Power of Attorney (e.g., Healthcare Proxy; Medical Power of Attorney) and Do Not Resuscitate (DNR) Orders.

Health Insurance Portability and Accountability Act (HIPAA) release – This permits your physician to discuss the details of your medical condition with someone you designate without violating the HIPAA privacy rules. Note: your Financial POA and/or Medical Directives may already incorporate HIPAA provisions within the document.

Advanced Planning Trusts

Beyond the RLT, a variety of trusts can help you address both family and philanthropic objectives. Some you may encounter include Dynasty Trusts, Intentionally Defective Trusts (IDGTs), Grantor Retained Annuity Trusts (GRATs) and Spousal Lifetime Access Trusts (SLATs). These are irrevocable trusts and may help lower estate taxes, provide a measure of control, and offer some asset protection. However, keep in mind you may permanently lose access to funds once they are moved into an irrevocable trust. Make certain you plan for your needs before funding these types of trusts.

Other Considerations

Review your life insurance1Life insurance is often part of an estate plan, whether it is a term policy to address the needs of the surviving spouse and family, or a permanent policy used for estate liquidity or enhancement. Reevaluate the purpose for the insurance you currently have and review the type, term and amount of insurance to ensure it is appropriate. Also, review the ownership and beneficiary designations of your policies to make certain they are aligned with your overall estate plan.

Communication – Once you have met with an attorney and established an estate plan, it is important to communicate your plan with your trustee, and if appropriate, your beneficiaries. Estate documents are not substitutes for conversations about values. Your family may not need to know all the details, but a discussion can be helpful. You should also place your documents somewhere that is not only safe, but easily accessible. Share this location with your trustee and other key parties. 

Although creating an estate plan may seem overwhelming, it helps to ensure that you and your family are well prepared. 

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