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The Recipe for a Satisfying Estate Plan

There are many misconceptions about who needs an estate plan and when such a plan is needed. Many believe that estate planning is only for extremely wealthy business moguls. Others believe it is important only at the tail-end of one's life. Neither of these is true. Estate planning is the process of making decisions about what happens to you, your money, and your property when you pass away or can no longer make decisions for yourself. Thus, estate planning should be standard practice for every adult age eighteen or older.

One way to think about estate planning is to compare it to a classic recipe you should have in your cooking repertoire by your twenties. Like that satisfying meal, your estate plan should have the right ingredients—or in this case, people.

Do you have the right ingredients?

Creating an estate plan often involves more people than you may initially realize. The recipe for an effective estate plan must include the right roles (i.e., the ingredients). Without the right people in the right roles, your estate plan may fall short and be ineffective. The following people involved in the estate planning process have different but essential functions and are critical to identify as part of your plan:

  1. Executor of Your Will. A executor is a person responsible for settling your affairs, including collecting and securing your property and accounts, paying your creditors, filing and paying any necessary taxes, and distributing any inheritance to your beneficiaries as set forth in the instructions memorialized in your will. If a person dies without a will, this critical role is filled by a special administrator appointed by a judge in court. By created a will, on the other hand, you select a person for this role and should choose someone you trust to administer your estate according to your plan.

  2. Trustee of a Revocable Living Trust. Another essential part of the estate planning recipe—specifically related to creating a trust—is the trustee. The trustee is the person or company responsible for managing the money and property in your trust. When you create a revocable living trust, you will often serve as the first trustee but will appoint another individual or company to serve as a backup (also known as a successor trustee). Generally speaking, the trustee carries out your wishes and instructions as outlined in the trust agreement. Typical responsibilities include managing and investing trust property and accounts, paying bills, filing taxes, and distributing your possessions to whomever you have listed in your trust. It is vital to choose someone who can handle the responsibility. Suppose you own property or accounts that might be considered complicated, such as investments and intellectual property. In that case, it is essential to choose either a sophisticated trustee or someone who is comfortable seeking the advice of a professional in that area. This is especially important because the trustee has a significant legal responsibility and a higher standard of conduct, called a fiduciary duty.

  3. Heirs or beneficiaries. Many people think heirs and beneficiaries are the same thing. This is not the case, even though they play similar roles. Your heirs are family members who are entitled to receive a portion of your money or property after you die. On the other hand, a beneficiary is a person or organization that you have identified in a will, trust, or other legal document to receive part of your property and money. Your list of heirs and beneficiaries may or may not be the same.

  4. Agents under Financial and Medical Powers of Attorney. An agent is someone to whom you give authority to act on your behalf. The most important agents in estate planning are your financial agent and your medical agent. The financial power of attorney gives your agent the authority to manage your financial affairs when you are still living but unable or unwilling to act, including paying your bills, filing your taxes, and managing your property. The medical power of attorney authorizes your healthcare agent to make decisions on your behalf only when you are unable to make decisions yourself, for example, when you are unconscious or under anesthesia. Both the healthcare and financial agents can only act with the powers and within the scope that you have specified in the powers of attorney. When selecting an agent for these roles, note that they do not have to be the same person. But it is important to communicate your wishes through your estate planning documents to ensure that your designated agents do things the way you want them done.

  5. Guardians for Minor Children. Another critical ingredient in your estate plan is naming someone to care for your children if you are unable to, either due to incapacity or death. Who do you trust? Who shares your values? Who would create the smoothest transition for your children? Who cares about them like you? This can be a particularly tough decision for parents, but the failure to nominate guardians in advance means the decision will be left to a court.

We Can Help You

Our firm has a history of creating satisfying estate plans that bring peace of mind to our clients. We counsel our clients as they choose who to trust in roles outlined above, and in doing so, we help our clients avoid many challenges associated with transferring property after death. Contact our office to discuss your estate plan today.

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