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Estate Planning – Who Needs It?

June 7, 2012 Douglas Davis

[image_frame style=”framed” align=”left”]/wp-content/uploads/2012/05/MP900289531-e1339074851901.jpg[/image_frame][dropcap4 variation=”red”]F[/dropcap4]or some reason we don’t often think about Wills, Trusts or Powers of Attorney, or about making sure that the things we own or are responsible for are going to be effectively managed in the event of our incapacity or death.   I have also noticed that most of my clients are over the age of 40, and have concluded that younger adults don’t believe they need an estate plan until they are much older or have accumulated more assets.

Every adult over the age of 18 should have a basic plan that can be modified based upon changing life circumstances.    Here is a simple checklist which includes a few basic things to consider at a minimum:

  1. If you are a legal adult (18 or 21 depending upon where you live):  All adults should have a Durable Financial Power of Attorney, and Durable Medical Power of Attorney, including Medical Directives or a Living Will, and a HIPPA Authorization.   These will allow you to designate someone you trust to make financial and medical decisions for you in the event that you are incapacitated during your lifetime.
  2. If you are unmarried:  You should have a Will prepared which designates where your material possessions will go at your death to ensure that parents, siblings or friends receive those valuables according to your desires.  A failure to do this will mean that state law determines who will inherit your assets.   You should also make sure that beneficiary designations on life insurance and retirement accounts have been properly made and updated to reflect your current desires.
  3. If you are married:   Depending upon the complexity of your estate and the ownership of real estate or business inerests, you should have either a Will or a Trust prepared to ensure your loved ones receive your possessions.   You should also include Durable Powers of Attorney designating a trusted friend or family member to make lifetime decisions for you in the event that you are incapacitated and unable to make your own decisions.
  4. If you are married or unmarried with children:   You will want to make sure that your Will or Trust, includes the designation of individuals to serve as Guardians for the care of your children after your death.  If you fail to name a Guardian, a court will name someone who may, or may not be someone you would choose to raise your children and make decisions for them.  You should also consider establishing a Trust to manage and protect assets provided to your children if you and your spouse pass when they are too young to manage those assets.  If you or your spouse have children from a prior relationship, it is essential that you consult an estate planning attorney to determine how to avoid the accidental disinheritance of those children.
  5. If you are wealthy:  In 2013 the lifetime credit against estate taxes drops to one million dollars and everything above that is taxed at 55% with the tax to be paid to the IRS within nine months of your death (they like cash).   Most people don’t think their estates are worth that much, but if you add up the value of your life insurance, retirement plans and annuities, investment accounts, tangible property and any real estate, you may be surprised!    There are a number of ways to reduce the tax bill depending upon your situation and your goals.   You should schedule a meeting and talk to an estate planning lawyer qualified to properly advise you of your options.
  6. If you are a senior citizen or are in poor health:  It is important that your estate plan is updated to ensure that you have properly designated individuals who are qualified to make financial and medical decisions on your behalf.  You should also consider a fully funded Revocable Living Trust and the naming of a Trustee who can manage assets for you in order to ensure that your instructions are followed after your death.

Who needs estate Planning?   Any adult who faces the possibility of incapacity during lifetime and who wants to ensure that loved ones receive intended possessions after death.