By Erin Wood
“I’m going away tonight.”
Those were James Brown’s last words before unexpectedly dying at 73. After four marriages and nine children, his estate was complicated, to say the least, and thoroughly under-prepared. The firefight over his assets has been going on ever since he spoke those words on Christmas day, 2006 – relationships have disintegrated and hundreds of thousands of dollars have been lost in court costs.
Estate planning, no matter how large or simple your assets, is a conversation everyone should have. From dividing up gigantic bank accounts to choosing the music for a funeral, putting a plan in place can keep a lot of stress and family tension from reaching fever pitch.
With this week being National Estate Planning Awareness Week, let’s look at a few estate planning fundamentals to help you start this conversation with yourself and those you love the most.
Wills
One of the most pervasive myths about estate planning is that it’s only for the rich. If all you have is a house, a small bank account and a few paid-for cars, you might wonder why you’d bother to divide it out on paper. Yet in every family, there are at least a few stories of a conflict starting over what seems like the smallest detail, leading to unnecessary stress and dysfunction in the future.
Your will is the cornerstone of your estate plan – everything starts and ends there. If you have nothing else, at least put a will together to divide your assets according to your wishes and neutralize disagreements before they happen.
Your will can also help through the probate process for your family. Probate court is often a huge drain on time, energy and finances and festers unnecessary tension in relationships. A well-structured will can make this process both more smooth and quick, freeing you up to grieve and be with family.
Trusts
A trust is an important estate planning fundamental because it gives you some control and prerogative about how your estate is distributed, even after your death. It may not seem like a problem at first glance, but a large windfall of money can bring stress and confusion right along with it.
A trust can help with this by attaching some important strings to inherited money. Actor Robin Williams created trust funds for his three kids, laying out the timeline that each would receive one third at age 18, half at age 25 and the remainder at 30. As simple as this cadence was, it allowed them time to acclimate to having and handling money in phases and not all at once.
Power of Attorney
Choosing a point person for decision-making is vital on several levels of estate planning. You have an executor for your will, a trustee for your trust and a power of attorney for legal, healthcare, financial and other matters. These positions are often all occupied by the same person but don’t have to be.
There are different types of power-of-attorney, from a very general POA with broad decision-making powers to a very specific document just covering healthcare decisions. Again, having these discussions beforehand can be an immense relief to your family when these decisions are necessary, especially with end-of-life healthcare.
You may never be in a situation where someone has to decide to discontinue life-support or other physical care, but most of us will likely have diminished mental capacity at some point. One in ten people over the age of 65 has Alzheimer’s, and one-third of people over 85, and that can put your family in a situation in which you’re still living – even physically healthy – and yet you can’t make decisions.
A Durable Power of Attorney for Healthcare helps you designate your decision-maker if you are mentally or physically incapacitated. Keep in mind too that this document is different than your Durable Power of Attorney for Finance, but they can designate the same person and most attorneys and other preparation professionals can help you do different kinds of POAs all at once.
What’s Apparent about Your Heirs?
Putting these plans together, whether it’s for end-of-life care or who gets the house in the Poconos, takes sensitivity and respect for who your heirs are and how they make decisions. We think the best of our kids, and we want the world for them, but we want to pass on the powerful tool of money in the most healthy way possible.
One child may be emotionally-driven and prone to indecision, so they may not make the best healthcare POA. Another child may be a minor still and unable to legally own a large financial estate – a guardian will have to be worked into the plan. Yet another child may have special needs and require a Special Needs Trust to care for them when you are unable to do so.
Every situation is unique, and although there are fundamentals, you need the right plan that works for your story.
We’ve put together a complimentary guide called “Estate Planning Simplified, Understanding Wills and Trusts” that can help you start and shape the estate planning conversation in your home. Click here to download your guide now!
This article is designed to provide accurate and authoritative information on the subjects covered. It is not, however, intended to provide specific legal, tax, or other professional advice. For specific professional assistance, the services of an appropriate professional should be sought.