Of the two “certainties” Mark Twain described in life (death and taxes), regular check-ups for ‘health’ should include your estate planning. Estate planning strategies can have real benefits of decreasing taxes while extending your quality of life. How often to have these estate planning check-ups depends on understanding building blocks of the estate planning process itself. In practice, you could have a very long list of basics in estate planning. For purposes of organizing a plan, however, we are going to look at only three building blocks than help you efficiently build an estate plan … or be aware of when you need urgent help in that planning.
Before looking at three general basic building blocks, let’s clear up two really common, and dangerous, misunderstandings about estate planning. First, some people think “I’ll get to it later.” The reality is that deciding not to take formal steps is a decision to use more informal processes. A decision to not be precise in planning is simply a decision to let others sort out your wishes, without clear instructions. You might compare it to not committing a favorite recipe to paper. Second, you are almost certainly already making basic decisions about estate planning: without even knowing you are. Your business, type of employment agreements, insurance levels or disability policies, the relationships you have with family or loved ones, debts and contracts, banking, deeds, and titles to property or vehicles all have different roles in planning a possible estate. Gathering documents for all these items in a single place is also important, even before you get help from an estate professional.
1. Communication With Family
No one answer works, for how much to ask or tell your family or beneficiaries, and those affected by your planning. On the other hand, people who will make decisions for you, regarding a trust or will, and financial advisers, should be involved in the planning. Other families have been torn apart by too-detailed knowledge of what is planned, or erratic changes to estate plans. One elderly man gave his children’s inheritance before he passed, to avoid “conflicts.” Sad to say, the children stopped visiting him.
One key benefit to having an open a dialogue with family as much as possible is to achieve key goals of estate planning. Such as, to help you decide what you want in your planning. Also, good estate planning increases certainties for you and the people you care about. Finally, estate planning also helps protect assets, by (a) decreasing the costs of ascertaining “what” you wanted and (b) how to get it done efficiently.
2. Picking the Correct Instruments
Like the favorite unwritten recipe mentioned earlier, there may also be proper ways to prepare a mix of assets. Wills were once one of the most important means of estate planning. While still vitally important, modern changes in how people access and transfer assets, as well as higher likelihoods of step-children and domestic partnerships, has really changed the working of wills. Wills may be a single facet of planning, but less important than a trust, depending on taxes and the assets involved. For that matter, the popularity of “Living Trusts” has in some instances conflicted with what a Last Will says. So while wills may not seem as crucial, even in small or simple spousal estates, they need to align legally with other planning instruments.
3. Understanding the Environment
“Environment” doesn’t mean weather, but the total circumstances and nature of how you live. Are there major changes to your life pending: loss of a partner or child, or marriage or divorce ? This might also mean that if you have a mobile lifestyle, in more than one state or country, that you need to address the various tax and residency issues involved. Are there changes coming in federal or state tax rates and inheritance laws? Your health or disabilities are common foundations to anticipating what is allowed or optimally wished for in your planning. What happens if you fall ill, but only for a short period of time? Is your home suitable for at-home care, or sheltered at all from nursing home bills?
Anticipating that you may have a more risk tolerant strategy than a successor or appointee to your interests is important to plan for. More than almost any other financial decision in life, your estate planning is truly about your life.
Conclusions: Tackling the Unknown is Part of Good Planning
First, the minute an ‘estate’ plan fails to address change, or the potential for assets increasing or decreasing, it’s not good enough. Second, when an estate plan involves other family members or a third party, it’s rarely a good idea to use off-the-shelf products and not have legal advice on goals. Third, the unknown needs to be acknowledged. This final aspect of good estate planning is ultimately where individual and tailored estate planning almost always requires a qualified, locally knowledgeable estate planning attorney. Local regulations, what laws apply, understanding of area and regional markets: all of these add up to selecting an estate planning professional who has deep knowledge of where you call home.
From the building blocks above, you might correctly suspect a very personal review of your estate planning is better than, say, the advice of a neighbor or on-line form. No matter how good, or how reliable an initial on-line service may seem, there is always the risk it’s wrong for a particular individual or family. On the other hand, having an ‘out of the box’ estate planning kit means you need to plan an in-person estate consult sooner, rather than later.
Finally, be ready to share vital details about how to access your varied assets. This includes passwords and other highly private information that often become a broken key in opening the door of even excellent estate planning. For a review of your best approaches to effective and personal estate planning, contact Skinner Law.