Saturday, February 28, 2009

What is Estate Planning?

Let me start by describing what estate planning is not. I was having lunch with a financial advisor last week, who shared with me a great story about an event that occurred during his career in the military. Before troops were being deployed into hostile territory, they were summarily interviewed by a base attorney who filled in Will documents for them. The substance of the discussion was getting a response to the question, “How do you want to leave your stuff?”

Although that story certiainly (and bluntly) illustrates one element of one of the issues addressed in developing an estate plan, proper estate planning accomplishes so much more than just that.

Essentially, proper estate planning is taking responsibility for your finances, your person, and the well being of your loved ones at three critical times:

(1) Now, During Your Lifetime:
  • What do you own? All that “stuff” (along with everything that you acquire in the future) is “your estate.” However you perceive the size and nature of your estate is irrelevant to whether or not planning should be done. It is simply a factor to help determine what type of plan will best suit your present situation and future goals.
  • Is your estate exposed to unnecessary financial liability by the way that you hold title to real estate and other important assets?
  • Who is on your team? Do you have an attorney you can trust to guide you through these important matters? How about complimentary professionals like insurance, financial and tax advisors? Bottom line, are you receiving the service that you need and deserve?

(2) If You Become Physically or Mentally Disabled:

  • Who will manage your finances (i.e. pay expenses, endorse a check, withdraw funds, reallocate investments, sell property, etc) if you cannot do it yourself? Someone else must have legal authority to do it on your behalf.
  • Who will make medical decisions for you if you can’t communicate? Will they have legal authority to do that? Will medical information privacy laws like HIPPA put them in a “catch 22” by preventing them from accessing medical information they might need?
  • Who will take care of minor children if you (or a spouse) cannot? Again, someone else must have legal authority to act as a guardian. You have two choices here: You can name someone that you want, or you can leave it for a court to determine. Who knows your children and the people closest to you the best .... you, or a judge you have never met?
(3) When You Pass Away:
  • What will happen to your property if you do no planning?
  • What if you write a Will? Does that cover all of your assets? Hint: It probably controls very few of them.
  • Do you want a court to have to approve the transfer your assets, or would you prefer to keep matters private?
  • Who will be given the authority to care for minor children?
  • How should you leave property to your children and other loved ones?

As you can see, estate planning involves very real and delicate issues that affect everything that you have, and everyone you love most. This planning is not automatic. You must choose to take control. If you are working with the right people, it’s a process that will empower you.

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