A good estate plan starts with thorough documentation

By Cathy Shoemaker, CPA, MBA, MST


This is the second in a series of articles explaining the importance of exploring estate planning strategies in anticipation of expected tax changes that could be enacted under the Biden administration. Be sure to also read our first article in the series, Proposed estate tax changes: prepare now to preserve your assets.

Think of an estate plan as a life plan. A good estate plan does more than simply detail what you want to happen to your assets after you die. It also protects you and your loved ones throughout every stage in life, and when you die, it saves others from guessing or arguing over what they think your wishes might have been.  Although it’s possible to avoid probate, many estates will go through this process of gathering assets, paying debts, and distributing the remaining assets to beneficiaries according to laws of the state where the person resided at the time of their death. Probate assets are those that are owned in only one name at the time the person dies and without any provision for automatic succession of ownership. Probate can be costly, time-consuming, and can result in assets being distributed to people other than those who the decedent wanted.

While an estate plan should be customized to your unique family and life situation, there are several types of documents that can work together to form a solid foundation for protecting and transferring your estate according to your wishes. As with all legal documents, they can take time to prepare to ensure all of your needs are being met, so the sooner you get started the better.

Last will and testament. This is a legal document that lets you decide what happens with your estate after you die. When you die without a will, you leave important decisions up to a local court and your state’s law. A will does not keep your assets out of probate, but it allows you to name an executor as your legal representative to oversee this process. In many states, a will is the only way to name a guardian for minor children.

Revocable living trust. This is a legal document, similar to a will, in which you (the grantor or trustor) set up a trust to hold title to property to be managed by a trustee (which can be you or someone else) for the benefit of another (the beneficiary). A living trust can help save the expense and delay of probate, which can take several years. Revocable living trusts can be revoked (ended) or changed at any time.

Living will. This document specifies the situations in which you do or do not want certain medical procedures to be used to sustain your life, such as artificial feeding and breathing, surgery, invasive diagnostic tests, and pain medication, when you are unable to make those decisions for yourself.

Healthcare power of attorney (HCPA). An HCPA authorizes a surrogate, such as your spouse, child, or other trusted person, to make decisions or consent to treatment on your behalf if you’re unable to do so at any time, not just end-of-life decisions.

Durable power of attorney (DPA). A DPA names someone to act on your behalf for certain matters, such as financial decisions, if you become incapacitated due to an illness or accident. You also may use this when you are traveling, to provide peace of mind and protection of your assets. A DPA can be revoked at any time and is no longer valid once you die.

Beneficiary designations. Assets with named beneficiaries automatically pass to them upon your death without the probate process. Beneficiary designations for assets such as bank accounts, investments, and life insurance policies are usually easy to add and update, as often as you’d like, by completing a simple form.

Talk with your Rehmann advisor today for expert guidance on evaluating your needs and developing a customized estate plan to protect you throughout your lifetime, and to ensure your assets are transferred to your heirs as you intend.

You can learn more about planning opportunities by joining Rehmann’s Empowered Planning series of webinars, including a playback recording of the recent webinar, “Empowered Planning: Your Personal Financial Strategy.”

These complimentary webinars and Q&A sessions are taking place throughout this year and provide expert insight and real-time examples of organizations and individuals who are seeking to build and maintain a strong financial foundation during these changing economic times. Learn more about the series, which is focused on planning ideas to help you move forward confidently, at Rehmann.com/webinars.

Look for next month’s article in our estate planning series, Business Transitions: incorporating wealth management with gifting and estate planning.

Cathy Shoemaker, a principal with Rehmann, provides tax planning and consulting services to high-net-worth individuals, closely-held businesses, and not-for-profit organizations. She also develops philanthropic strategies to maximize wealth transfer through private foundations and charitable trusts. As a member of Rehmann’s estate, gift, and trust group, Cathy establishes policies and best practices and provides internal training for other Rehmann associates.

Published in Wealth Management

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