Patrice Ann Moore, CPA Roberts, McKenzie, Mangan & CummingsTo paraphrase an old saying, the only things in life that are guaranteed are death and taxes. Actually, there may be three guaranteed things - death, taxes and change. Estate plans need to change in response to changes in your life and changes in the law. The plan that you made ten years ago, or even two years ago, may not work today the way that you originally intended. Your plan needs to be a dynamic thing that changes as your needs change.
Whether formal or informal, everyone has some version of an ‘estate plan’. If you don’t create a plan yourself state law will determine how your property is distributed after your death. You stand a much better chance of getting the result you want if you plan for yourself rather than letting the state do it for you. Anyone who owns property – a home, car or bank account – needs a plan. The purpose of an estate plan is to make sure that if something happens to you, your property will be distributed according to your wishes. One of the simplest ways to do this is to use joint ownership or beneficiary designations such as a “transfer on death” designation on a car title, or a “pay on death” on a bank account. Some assets like life insurance and retirement accounts require beneficiary designations to transfer them upon your death. An important thing to remember about beneficiary designations is to always keep them current. A death of a beneficiary or a divorce without changing a beneficiary may create significant problems for your family. These planning tools also may override instructions you give in a Will or a Trust, so you must use them carefully.
As you grow older your needs will change. You may buy a home, marry and have children. You now may need to take care of a stay at home spouse, or designate someone to take care of your children if something happens to you and your spouse. Life insurance and Wills can be used to take care of these important planning goals. Having enough life insurance can help family members maintain their lifestyle after your passing. A Will is a legal document that states what you want done when you die. It can name a guardian for minor children and it also names your personal representative – a person that you trust to carry out your final wishes. It can also accomplish many other things as your needs require. Without a Will, the State will distribute your property for you and/or appoint a guardian for minor children. Wills are administered through probate courts, and the administration is a matter of public record.
Another planning document is a Revocable (Living) Trust. A key benefit of a Living Trust is this planning document avoids the probate process and maintains your financial privacy. With a Living Trust you can also name someone else to manage your assets if you are still alive but incapacitated. Many estate plans often use Living Trusts combined with a “pour-over” Will to ensure that all your assets are transferred properly upon your death. Other basic planning documents include a Durable (Financial) Power of Attorney and a Health Care Directive (Living Will). A Durable Power of Attorney tells who you want to handle your finances if you aren’t physically or mentally able to do so. A Health Care Directive expresses your wishes for your medical care if you aren’t able to speak for yourself.
This article only gives a start on the planning process. No matter what plan you have, you need to be sure to review it on a regular basis to ensure it fits your needs at each stage in your life. Having a team of skilled advisors that work together can help you to achieve your goals. Teams include an attorney, CPA, life insurance specialist, and also possibly investment advisors, bankers, charitable giving advisors or other related professionals. These people, all working together, can help you realize your goals and protect your assets. And really, isn’t that what this is all about; protecting ourselves and our loved ones?
