ESTATE PLANNING: MORE THAN JUST A WILL
by Thomas D. Begley, Jr.
Estate Planning is a process by which a
person designs a strategy and prepares documents to transfer the assets
accumulated during a lifetime of work and savings to intended
beneficiaries.
Working hard and living frugally, most people create and build net
worth. They generate savings in bank accounts, purchase a home, and
acquire other investments such as stocks, bonds, mutual funds, IRAs and
401-K plans. Proper planning will insure that these assets are passed
onto loved ones with a minimum of taxation.
Recent surveys have revealed that over forty percent of the population
have no will. In those situations, state writes a will for the person
dying. The state written will seldom makes sense. The family of the
person dying without a will must spend needlessly to qualify for the
administration of the estate and purchase a bond.
In estates of more than $1,000,000, federal estate tax is a
consideration. These taxes can usually be avoided or at least minimized.
Traditionally, an estate plan was simply a will. However, with the
growing medical needs of an aging population, as well as the ever
present specter of the Internal Revenue Service, prudent estate planning
requires additional protections for all of us. Even the best written
will has little value if one's assets are depleted in later years by
health care costs which can be mitigated or borne by someone else.
Any prudent
estate plan should address three questions:
(1) Where do I want my money to go after my death?
(2) How can I protect my estate and myself if I become disabled?
(3) Do I want my life to be extended by life support even though a
medical event has left me in critical condition without any hope of
recovery?
In many instances, these questions should be answered by considering
lawful methods to avoid taxation and to minimize possible nursing home
costs. The documents, which are necessary to answer these questions, are
a will, living will and power of attorney.
A will declares who shall inherit an individual's assets (the
beneficiaries) and who shall be responsible for distributing them to
such beneficiaries (the executor). For young parents and couples, a will
can also be used to appoint a guardian for their children and a trustee
to manage a child's money until they are old enough to handle it
themselves.
A Power of Attorney should be executed appointing an agent to protect
ones person and property in the event of disability. Individuals, who
become disabled mentally and do not have a power of attorney, can only
be protected by an expensive and humiliating procedure known as a
guardianship, whereby they are judged to "incompetent" in the public
forum of a court.
A living will or advance directive should be signed to set forth ones
intentions in a situation where there is no reasonable hope of their
recovery or regaining a meaningful quality of life. A living will is
often combined with a healthcare power of attorney appointing a loved
one as healthcare representative to assist in making end of life
decisions.
An often overlooked aspect of estate planning is the coordination of
benefits. A will disposes of assets forming part of the probate estate.
The probate estate or assets only in the name of the decedent. Jointly
owned property, life insurance, retirement plans, annuities and other
assets pass outside the probate estate and are not governed by the will.
All of these assets must be coordinated to accomplish the individuals
estate plan.
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