Estate Planning

Do not do estate planning online or alone. These are some of life’s most difficult decisions. You need a trusted advocate. Gary offers expert guidance and honest advice, giving each issue the attention and sensitivity it deserves. He gives you all the information you need to make the best, most well informed decisions for you and your family.  It is easy to make estate planning mistakes without meaning to.

The sooner you begin to plan for your future, the more options you will have to protect everyone you love and everything you own! 

You will have peace of mind, comfort, and assurance that your loved ones and everything you own is being protected!

What is Estate Planning?

Estate Planning is about protecting what you have now and what you will pass to your children later.  Estate Planning is about preparing for the unknown events of life.

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)

Estate planning in general is more than just getting your affairs in order and deciding who gets your hard-earned wealth.

Estate Planning is also providing management of your assets even if you should become incapacitated or unable to make sound financial and legal decisions.

Why Plan Ahead Now?

Nobody knows what will happen in the next minute, much less in the next 30 days.  Anybody could be in an accident, or have a medical incident at any time.

If something happened, 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 who you want to get your stuff, how much each person gets, and when each person gets their stuff. 

Planning allows you to minimize taxes, court costs, fees, probate cost.

Planning gives you comfort and peace of mind that the people mourning for you don’t have to be burdened with red tape, court, costs, and confusion.

You, personally, are going to feel good.

Your stress will be relieved, because you know that you’ve taken care of everything that you can take care of.

You’ll stop worrying about the future of your family.

You’ll sleep better at night knowing that you have done everything you can for your family. 

You’ll bask in the knowledge your family will appreciate what you’ve done.

You’ll finally be able to relax and enjoy the fruits of your labor. 

You’ll avoid the regret of not having taken a simple, easy step.

You’ll 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.)

You stay in charge of who makes your decisions if you are out of it. 

Name who you want to care for your minor children.

Decide who gets what, when they get it, and the conditions under which they get your stuff.

Name who you decide to manage your affairs and wrap things up.

Leave a final gift to charity or your Church.

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 just means “the stuff you have.”  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 right to:

  • Make your own financial decisions
  • Make your own legal decisions
  • Choose your healthcare options, including refusing treatment all together
  • Have a family
  • Give your stuff away to who you want, when you want, how you want
  • Sell your stuff
  • Buy stuff
  • and much, much more…

Minimal Estate Planning

At a minimum, you should have a Durable Power of Attorney and a Last Will and Testament.

Durable Power of Attorney

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.

Last Will and Testament

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 Complete Estate Planning

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. 

Healthcare

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.

Avoiding Probate

Beneficiary Designations

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.

Beneficiary Deeds

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

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.

POD/TOD

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

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

But, 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 could 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.

  1. 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.
  2. 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?”

  1. Find a reliable attorney that does this type of planning all the time.  They should provide excellent estate planning at a reasonable price.
  2. 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

Naturally, you want to what’s best for you and your family, don’t you.  Secrets of Excellent Estate Planning helps you do just that.  Most people want to have the best plan they can.  Secrets of Excellent Estate Planning tells you 37 mistakes you must avoid in your plan to do the best you can for you and your family.  CLICK HERE to get your copy.