Estate Planning Basics: What should be covered in any estate plan

Tibetan couple in Dharamasala, India
Tibetan couple in Dharamasala, India

Foundational Planning – the Basics

The foundation of all estate plans contains:

Last Will or a Revocable Living Trust,

a Financial Power of Attorney,

a Medical Power of Attorney, and

a Living Will.

The combination of these documents allows you to designate how your assets and health will be managed if you ever become disabled.  Further, the Last Will or Revocable Living Trust provides for the distribution of your assets upon your death – to the individuals or organizations you choose and in the manner you decide.

The foundational planning of the Inca in Peru.
The foundational planning of the Inca in Peru.

A good estate plan with careful planning should allow you to:

During life:

--Manage and enjoy your assets as completely as possible

--Transfer assets to the next generation while minimizing transfer tax upon the transfer or at death.

--Meet your charitable or religious contribution goals

If you become disabled:

--Have at least one primary and one alternate financial decision maker legally recognized and ready to assist you.

--Have at least one primary and one alternate medical decision maker legally recognized and ready to assist you

Upon death:

--Designate who will receive your assets at your death

--Specify how those individuals will receive your assets

--Designate a guardian and trustee for your minor children

--Minimize any transfer taxes

--Ideally and with careful planning, replace any value lost to taxes

Why do I need a will?

Wills are important.  A will ensures that whatever personal belongings and assets you  have will go to family or beneficiaries you designate. Without a will, the court makes these decisions.

If you have children, a will ensures that your wishes regarding your children will be clear.  You will be able to designate a guardian for your children's daily care.   By completing a will, you will also be able to name a trustee who will be responsible for taking care of your financial resources for your children until they are adults.

Depending on the size of your estate, careful estate planning in a will can create significant tax benefits.  If you have a will and other foundational estate planning documents taken care of you will also avoid subjecting your family and loved ones to confusion and anxiety at a difficult because your wishes will have already been made clear to them.

What does a will allow me to do?

In your will, you can name:

Your beneficiaries. You may name beneficiaries (family members, friends, spouse, domestic partner or charitable organizations, for example) to receive your assets according to the instructions in your will. You may list specific gifts, such as jewelry or a certain sum of money, to certain beneficiaries, and you should direct what should be done with all remaining assets (any assets that your will does not dispose of by specific gift).

A guardian and trustee for your minor children. You may nominate a person to be responsible for your child’s personal care if you and your spouse die before the child turns 18. You may also name a trustee—who may or may not be the same person—to be responsible for managing any assets given to the child, until he or she is 18 years old or older, depending on your wishes.

A personal representative. You may nominate a person or institution to collect and manage your assets, pay any debts, expenses and taxes that might be due, and then distribute your assets to your beneficiaries according to the instructions in your will. Your personal representative serves a very important role and has significant responsibilities. It can be a time-consuming job. You should choose your personal representative carefully.

Asset protection/tax planning. A properly designed estate plan should:

-- protect your assets, your person, and your business from a possible future disability;

--protect your assets from liability during and after your life;

--distribute your assets tax efficiently at your death; and

--ensure that assets left to young beneficiaries are left inside of a structure such as a trust that will provide management and protection of these assets for them.

Special needs planning.  Planning for a family member with special needs is often a difficult endeavor for families and is especially important for families with significant assets.  Many planning techniques are available to ensure that a loved one with special needs is provided for without jeopardizing their ability to receive the public benefits they need and to protect them from fraud.

© 2012 Tanya Shimer All Rights Reserved.