Not Just Planning for Where Your Assets Go

Estate planning is a task that many individuals approach with absolute dread – like going to the dentist. However, putting a comprehensive estate plan in place can be both a relieving and painless process. Estate planning is an invaluable tool to make difficult times, like illness or death, easier for families to navigate. A comprehensive estate plan will address both of these situations. If you already have an estate plan, be aware that there are a few things you should do to avoid pitfalls we see regularly.

Why Do I Need an Estate Plan?

Estate planning is really planning for two scenarios. First, who has financial and medical decision-making authority for you while you are alive, but possibly incapacitated. Second, upon death, your estate plan will determine who is to receive a life’s worth of assets and personal belongings. Planning for what happens if you lose your mental or physical capabilities is not as commonly discussed, but is invaluable planning. These situations can arise for anyone, age 18 to 100. A person can become incapacitated at any age and by a variety of causes, such as from a car accident, illness or advanced age. You want to ensure that if you lose the ability to take care of managing your finances or making your own health care decisions, you determine who does this for you. This is usually done by using two separate documents, a General Durable Power of Attorney and a Health Care Declaration and Durable Power of Attorney for Healthcare.

The General Durable Power of Attorney will name a trusted individual, such as a spouse or adult child, to make sure your day-to-day financial matters are taken care of. This includes things like paying bills and filing taxes. The Health Care Declaration and Durable Power of Attorney for Healthcare addresses three areas – your instructions regarding end of life decision making; naming an agent to make health care decisions on your behalf during incapacity; and allowing access to your protected healthcare information. Not having these documents in place may mean that family members may have to go to court to obtain access to financial accounts or make medical decisions on your behalf.

Planning for what happens at death is more commonly known. There are two main goals clients want to accomplish with this planning: making sure your property goes where you want, and avoiding probate. Probate is the court process of making sure that the property owned solely by a deceased individual and without any designated beneficiary gets to the rightful heirs. Most people want to avoid probate for numerous reasons, mainly because it is costly, time consuming, and public record. Avoiding probate can be accomplished with trust planning or non-probate transfers on individual assets – both of which are backed up with a Will to catch forgotten assets. Each of these mechanisms has positives and negatives and will vary as to what is appropriate for each individual situation.

I Have My Estate Plan … Now What?

If you already have an estate plan in place, there are a few pitfalls to avoid to ensure the plan remains effective. First, if the estate plan includes a trust, make sure it is funded. Funding a trust is the process of titling assets in the name of the trust or updating beneficiary designations appropriately so that the trust becomes the asset owner at the appropriate time. Without properly funding the trust, any attempt to fully avoid probate will likely fail and other lifetime benefits of trust planning are lost.

A second common pitfall is that once the estate plan is prepared, it gets filed away and either never reviewed, or reviewed too late – such as when the person lacks the capacity to make changes. As individuals, lives and families evolve over time and estate plans need to reflect these changes. Who you would like making financial and health care decisions on your behalf may be different today than 15 years ago. Additionally, laws change, and there are several instances where plans can now be simplified.

So what do you need to do? The best practice is to review your estate plan every few years or after any major life event for you or anyone named as a beneficiary or agent in your documents. If it has been more than a few years since your documents were created, it would be appropriate to meet with an attorney to make sure that your plan is still in line with both your wishes and the current laws. By taking these steps, you can ensure your estate plan is up-to-date, effective and will help your family navigate these difficult times that will inevitably arise.

Helen Cripps, Mike Sukup and Jason Simmons are attorneys with Cripps & Simmons law firm in Columbia. Combined they have more than 40 years of experience in the estate planning field.


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