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ESTATE PLANNING OVERVIEW

The Issues

Estate planning means much more than preparing a Last Will and Testament* or tax planning for the disposition of your assets upon your death. It is the process of accumulating and disposing of an estate to maximize your goals. Your goals typically include making sure the greatest amount of the estate passes to intended beneficiaries while minimizing the amount of taxes due. Estate planning must also provide for administration and protection of assets during your lifetime (including transfer on death/beneficiary designation assets), and for decision making in the event of a disabling illness. Any complete estate plan should contain:

1. A Last Will and Testament;*

2. A durable health care power of attorney naming an agent (and an alternate) responsible for medical decision-making;

3. A living will or other advance directive giving instructions concerning the type of care one wishes to receive (or avoid) in the event of a terminal illness or persistent vegetative state; and

4. A durable financial power of attorney naming an agent (and an alternate) responsible for asset and financial management.

Estate planning may also include the creation of trusts and recommendations about beneficiary designations. Estate planning is an opportunity to make wishes known about your health care and asset distribution and to determine what person(s) will be responsible for carrying out those directives. You may state your preferences concerning the type of care you receive, what types of medical care you do not wish to receive, and who you wish to act as your agent in carrying out those wishes. If you do not leave a Last Will and Testament or trust, many of your assets will be distributed according to the laws of intestate (without a will) succession. There are laws in each state governing the rights of surviving spouses, heirs, and next of kin in the absence of a Last Will and Testament. Upon death, certain assets which have designated beneficiaries transfer as directed in the account documents, even if different from the Will. Joint accounts usually pass to the other owners. All other assets pass either as the person directs in the Will or as the legislature directs under a state’s intestacy laws (if there is no Will). Although there is a large exemption from federal estate tax, there may be other taxes due on death.

Scams/Do-It-Yourself Estate Planning

Often people are told they need to have a complicated revocable living trust in order to avoid probate. In some situations and in some states, this may be good planning, even though generally no tax savings result from using these trusts. However, sometimes it is a waste of money and effort to have a living trust. Likewise, people are sometimes told that they need to purchase an annuity, and this may be a good investment in some situations but not others. Documents downloaded from the Internet or copied from other sources may not work properly in your state or may not meet your goals, and when you need them, it may be too late to fix the problem.

What you need to know

In preparing an estate plan, it is essential to administer all your assets. Do a complete inventory of everything you own before contacting your estate planner. Your estate consists not only of your home, car, and bank accounts. It also includes life insurance policies, annuity contracts, investments that you may own (including those held jointly with other persons), your IRAs and other retirement accounts, and any other assets over which you can exercise control. If possible, keep a centralized and secured record of all of your financial accounts, insurance policies, credit and debit cards, loan accounts, safe deposit box, and account IDs and passwords. You will need to make decisions about what to include in your estate plan. First, list any specific gifts to family or non-family members and/or to charities. Determine who will inherit your property upon your death. Be certain that your spouse or heirs are capable of managing financial affairs after you. If capacity or vulnerability is an issue, consider naming a trustee to handle financial affairs for him or her. Designate an Executor or Personal Representative to administer your estate, as well as an alternate for this role. Special arrangements may be needed if there are particular family issues, such as children from a previous marriage of either spouse or any recipient with a disability. Once these decisions are made and your inventory is completed, your attorney will be able to advise you as to the best techniques to use in planning your estate. In the event of a disability, decide who will be your decision-makers for your finances and health care options. Finally, consider the difficult questions of what type of care you would want or not want in the event of terminal illness. If you have special desires concerning disposition of your remains, explain these desires during your planning conference as well. These are complicated and personal issues. Some insurance vendors call themselves estate planners as do some accountants and financial planners. Often, these individuals will be selling some type of product or service. Use caution in attending free seminars about living trusts or other arrangements since such programs often will sell you documents that you do not need or advocate plans that do not actually work. The law is constantly changing, and books or materials on the Internet are not always up to date. While there are pre-printed forms readily available for wills, powers of attorney, living trusts, and living wills, these may not meet your specific needs. Completing them properly can be difficult, and you cannot Correct your mistakes when you are dead or disabled.

National Academy of Elder Law Attorneys, Inc.™ www.NAELA.org

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