Estate Planning – Focused on You
Estate Planning is your blueprint for how your property and money should be managed, used, invested, and passed on in case of your incapacity or passing…
Frequently Asked Estate Planning Questions
An Overview of the Process
1. Estate Planning Strategy Session
2. Provide Needed Information
3. Documents Drafted & Presented
4. Documents Reviewed and Approved
5. Sign Documents & Fund as Needed
Estate Planning protects your family and shows how much you love them by making a Last Will and Testament, putting a Durable Power of Attorney in place, creating a Living Will, making arrangements today, and more. . .
Are You Aware Without Your Estate Plan, the Results Can Be Devastating to You and Your Family?
|With a Plan||Without a Plan|
|Prevent Probate – Save Your Family From pounding headaches, large expense, and lengthy time||The State has decided how your stuff is to be divided and when people get it. All decisions overseen and directed by a Judge.|
|Stay in control of who gets your stuff, how it is used, and when they get it||The Law of the State and a Judge decide who, when, and how much. This is where most families end up fighting.|
|Control who manages your affairs and how when you can’t. Your private affairs remain private.||The State says somebody must step up and get a guardianship over you and your stuff. Then the laws and judges must be kept informed. Your private affairs become public.|
|Preplan for Long Term Care||Long Term Care becomes an emergency|
|Save Money – Probate, unnecessary taxes, and more||The cost of settling your affairs can be higher than you expect|
By putting your affairs in order, not only are you putting practical steps in place to ensure the well-being of you and your loved ones but you are also shaping your legacy in a meaningful way.
Deciding what will happen to your home, your financial assets, and your personal possessions after your passing can be a difficult process.
However, if you don’t take the time to make these decisions now, the courts may end up dividing your property for you. If you don’t take the time to plan, a court may decide to let somebody else make your decisions.
Both options take money and time that away from your family.
You have two choices, and only one of them makes sense…
You can continue as is and leave you, your family, and your assets at risk
Plan to positively impact those who love and need you so that even IF there were a situation where you can no longer financially or emotional support others, you can still maintain control over your life, money, and legacy while protecting you, your family, and your money.
Now, the Good News
What is Estate Planning?
Estate Planning protects you and your assets now and what you pass to your spouse and children later. Estate Planning is being prepared for the unexpected events of life.
Effective Estate Planning eliminates risks, doubts, and uncertainty. Effective Estate Planning keeps your assets out of jeopardy.
What is an Estate?
Your estate is everything you own. More than that, your “estate” is also your rights. Your rights to make personal, financial, legal, and medical choices without interference or outside influence.
The phrase “Estate Planning” is Probably the Worst Choice of Words ever…
Maybe a better term would be “Personal Protection Planning” or just “Planning Ahead.”
The word “estate” conjures up images of big houses and a lot of money. Don’t let the word estate fool you. It doesn’t mean a big house and a pile of money to burn.
Estate in law means “the stuff you have” or a “collection of property.” We all have an estate. Even if it just your clothes, that is your estate.
But, you have much more important things to protect than just your stuff. You have a set of fundamental rights that can get ripped away by a judge. Naturally, you don’t want that, right.
You have the rights to:
- Make your own financial decisions
- Make your own legal decisions
- Make you own healthcare decisions – including refusing treatment
- Give what you have to who you want, when you want, how you want
- and much, much more…
More Than Just Final Gifts
Estate planning is more than just getting your affairs in order and deciding who gets your hard-earned wealth.
Estate Planning is ridding risks, eliminating worry, keeping your family out of jeopardy, and getting rid of doubts.
Other Definitions of an Effective Estate Plan
What is a good definition of estate planning? Wikipedia defines it like this: “Estate planning is the process of anticipating and arranging, during a person’s life, for the management and disposal of that person’s estate during the person’s life and at and after death, while minimizing gift, estate, generation skipping transfer, and income tax.”
Charles Schwab defines it as “An estate plan is a collection of documents that specify how you want your money and other assets distributed, making it easier for your loved ones to handle your affairs during a time of grief.” (http://www.schwab.com/public/file/P-3592399/gde27055.pdf)
Why Plan Ahead Now?
Nobody knows what will happen in the next minute, much less in the next 3 days. Anybody could be in an accident, or have a medical incident at any time.
If something happens, who would get your stuff, how much, and when? Who would finish raising your children?
No matter how small your “estate” is, estate planning is so very important. Planning allows you to decide now how your life will be managed in case of incapacity. Planning allows you to decide how much risk you are willing to tolerate.
Minimize taxes, court costs, fees, probate cost.
Gives you comfort and maximizes peace of mind that the people mourning for you don’t have to be burdened with red tape, court, costs, and confusion.
You can prevent considerable trouble; a lot of frustration; and large, expensive financial hardships for you and your family.
Your family can avoid the costs, delays, publicity, and hardships of probate.
(If you don’t know, Probate is the court supervised process of approving of your Will and distributing your stuff under court supervision. It can take anywhere from 4 months to many years. While Probate is occurring, your assets are kept away from the people that may need them the most. Probate can also be costly… Probate can cost 6% or more of the total estate value.)
Minimal Estate Planning
At a minimum, you should have a Durable Power of Attorney and a Last Will and Testament.
A Durable Power of Attorney may be the most useful of all the documents you need. A Power of Attorney allows somebody that your trust to be appointed to take care of your legal and financial affairs if you become incapacitated. Often the person you appoint is called an “attorney-in-fact,” “agent,” or “fiduciary.”
If you do become incapacitated, your “attorney-in-fact” can step in and take care of your legal and financial affairs. They can appear in court on your behalf. Your “attorney-in-fact” can manage your assets (within certain limits).
Without a Durable Power of Attorney, nobody can represent you without getting a Guardianship. A Guardianship rips your rights away and gives them to somebody else to make your decisions. However, if you don’t have somebody you trust, then you may want the courts to oversee the person who is managing your affairs. In that case, you would want a guardianship.
A Last Will and Testament is like a letter to the courts describing how you want your worldly goods passed out to your “heirs” and “devisees.” An heir is a person legally entitled to your stuff. A devisee is a person who receives a gift via a Last Will and Testament.
A Will does nothing for you during your lifetime.
Your Will is a legally binding document. In addition to telling the court how to pass out your property, you can also use your Will to nominate a guardian for your minor children. That is about all you can do in a Last Will and Testament. You can’t keep long term control over assets like you can with a Trust.
The Components of an Effective Estate Plan
In addition to a Durable Power of Attorney and a Last Will and Testament, you need to take care of medical decisions and avoiding Probate.
You take care of medical decisions with a trio of documents: a Durable Power of Attorney for Healthcare, a HIPAA Waiver, and a Living Will (Advance Directive).
HIPAA is The Health Insurance Portability and Accountability Acts and restricts third party access to your healthcare information. This restriction extends to your immediate family as well. If something happens, the doctors are not supposed to share your protected medical information with anybody you haven’t authorized to get it.
A Durable Power of Attorney for Healthcare is like your Durable Power of Attorney, only just for your healthcare decisions. If you become incapacitated or unable to make rational decisions in a medical setting, then your “agent” can step in and make medical decisions on your behalf, following the instructions in your Durable Power of Attorney for Healthcare. Without this document, the doctors will make decisions for you based on their rules of conduct and state law.
A HIPAA Waiver or Medical Information Release is a permanent form allowing the people named to have access to your medical records. It also allows them to talk to the doctors and get information. You may already be familiar with the concept. When you go to the doctor’s office (or hospital) you have to name the people who they can talk to. That is the same thing as the HIPAA waiver.
Finally, in your healthcare trio of documents, you need a Living Will, sometimes called an Advance Directive. This final document tells the doctors what to do if you should have an incurable or irreversible condition with no hope of recovery that will cause death within a relatively short time, and am no longer able to make decisions regarding my medical treatment. It covers things like feeding tubes, IV fluids, and heroic measures.
A beneficiary designation is usually used on stock accounts, retirement accounts, and life insurance. It is where you name a person or persons (the beneficiary) to receive the assets of the account or insurance. Funds that pass this way pass outside of probate. The drawbacks are few if any.
A beneficiary deed (deed on death) is a real estate deed that you sign and record with the county the property is in. On the death of you or you and your spouse (the grantor), the property passes to whoever you have named (the grantee) in the way you have named outside of probate. Real estate passed with a beneficiary deed passes outside of probate. However, in Arkansas beneficiary deeds are subject to Medicaid recovery. The drawbacks are few if any.
One major drawback is that the people get the land in hand almost immediately. If you have a young adult (say under 30), you may not want them getting a large lump sum of money all at once. What would have done with a large lump sum when you were young?
Joint ownership that avoids probate in Arkansas takes two forms. They are Tenancy by the Entirety and Joint Tenancy. Both real estate and bank accounts can be owned in Joint Tenancy.
Joint Tenancy is where two or more people own the property and each has the right of survivorship. The right of survivorship means that whomever survives takes all. For example, if you and your brother own a piece of property in joint ownership, and your brother passes, then you take complete ownership outside of probate.
Tenancy by the Entirety is a form of Joint Tenancy just for married couples. Arkansas has a strong presumption for Tenancy by the Entirety for married couples. Other than that, it works the same as Joint Tenancy.
Joint Tenancy for real estate has the major drawback that the other owner’s creditors can go to court and ask for a partition in kind to recover the creditor’s money. A partition in kind is where the court orders a sale and splits the money between the owners.
Joint Tenancy for bank accounts has the major drawback in that the other owner’s creditors can directly draw their money from the account. This means if you have put a child’s name on the account, the child’s creditors can get to “your” money, including medical bills.
Joint Tenancy for bank accounts can also complicate Medicaid planning. Medicaid may look upon half the amount in the account as a gift. And, if the other person withdraws money, it will be deemed a gift.
Payable on Death or Transfer on Death is a beneficiary designation for a bank account. You put a name or list of names attached to the account of the people you want to receive the funds in the account when you pass. These funds will pass outside of probate.
One major drawback is that the people get the money in hand almost immediately. If you have a young adult (say under 30), you may not want them getting a large lump sum of money all at once. What would have done with a large lump sum when you were young?
Trusts are a topic of their own. For much more information click here –> Revocable Living Trust.
Trusts have many advantages, but one of them is that you can avoid probate for all of the funds in the trust.
A trust is a bucket you put assets into. Somebody gets to hold the handle and control the bucket. That person is the trustee. The person who put stuff into the bucket is the grantor, the trust maker, or the trustor. The person who gets to “play” with and eventually own the stuff in the bucket is the beneficiary. The beneficiary is the person that will benefit from the stuff in trust.
Along with the stuff, you put a set of instructions that anybody else who holds the handle must follow. Those instructions can be as simple or complex as you want, within Constitutional bounds. You can maintain control of the money and other property for a long time.
If You Don’t Do Your Estate Planning
If you don’t plan ahead to maintain and manage your rights, then a judge can rip your rights away and give somebody else (a “guardian”) the right to make those decisions for you.
What can happen if you don’t plan ahead?
First, you leave your family in a financial bind. If you something happens, and you haven’t planned ahead, your family could be strapped for cash until everything is settled. Especially if you haven’t shared with them all of your insurance policies, bank accounts, and retirement plans. When my father passed away, he hadn’t shared where anything was. We had to go from place to place finding all of his stuff. If you have just a Last Will and Testament, your family may have to wait a year or more for the courts to finish the process and release the money.
Second, You could put yourself in a bind. If you are unable to make financial, legal, or medical decisions (think car accident, stroke, or heart attack) you spouse can’t just step in and take over without a plan in place. One lady found this out the hard way when her husband had a stroke. She went to his financial planner to get money for his care and was informed that without a guardianship or power of attorney, she couldn’t get the money. Not to mention that your family would have to go to court for a guardianship, causing them more stress in an already stressful time.
- You could find yourself on life support for years against your true wishes. “Google” Terri Schiavo. She was on life support for 15 years because she hadn’t planned ahead. Her husband and mother fought through the courts for 15 years.
- Your money could go to young children. What would you have done with a lump sum of cash at 20 years old? What would your children do with a lump sum?
How do you protect yourself, your family, and your “estate?”
- Find a reliable attorney that does this type of planning all the time. They should provide excellent estate planning at a reasonable price.
- Get a minimal estate plan in place to protect your right to make financial, legal, and healthcare decisions
- Durable power of attorney
- Healthcare power of attorney
- HIPAA waiver/Health Records Release
- Living Will/Advance Directive