An Estate Planning Primer

Estate planning can be defined as the process of putting an individual’s financial affairs in order and telling their loved ones what’s important to them. The most important goals can be stated as follows: (1) maximize the individual’s enjoyment of his or her estate during his/her lifetime; (2) protect themselves, their loved ones, and their assets during their lifetime; (3) maximize the beneficiaries’ enjoyment of the estate after the individual’s death; (4) minimize the expense and taxation that can accompany the transfer of assets; and (5) transmit the individual’s wisdom and values to his/her beneficiaries.

Estate planning is concerned with two subjects (a person’s physical being and a person’s wealth) and two relevant time periods (a person’s incapacity, if any, and his or her eventual death). It also encompasses many fields of law – family law, real property law, contract law, and taxation to name a few. I have written nearly one hundred “Estate Planning 101” columns on issues in these fields of law that impact estate planning and plan to write many more on various nuances.

In order to implement an estate plan, certain core documents need to be created: (1) Living Trust (or conventional will in limited circumstances), (2) Durable Power of Attorney, and (3) Advance Health Care Directive. The living trust can address issues concerning a person’s wealth both during incapacity, if any, and after death. A will can only address issues concerning a person’s wealth following death. The durable power of attorney can address a person’s wealth during incapacity but ceases to have any power after that person dies. The advance health care directive addresses a person’s physical being both during incapacity and after their death.

You might wonder why one would need both a trust and a durable power of attorney if both address a person’s wealth during incapacity. The reason is that a trust can only operate on those assets that are brought under its umbrella by either changing the ownership of the asset to the trust or making the trust its beneficiary. Some things cannot be put into the trust, however by their very nature, such as certain transactions involving third parties. For example, a durable power of attorney would allow a person’s agent to enter into transactions necessary to provide for the person’s personal care and to maintain the person’s customary standard of living during incapacity such as hire and compensate household, nursing, and other employees, arrange residential care in a convalescent hospital, skilled nursing home, or other alternative residential facility. These things are highly important but cannot logically be placed under authority of a living trust.

As an estate planning attorney, my goals are to (1) create customized plans for my clients that address the subjects of estate planning during the relevant time periods; (2) preserve family wealth and harmony; and (3) avoid costly court procedures such as probate, conservatorship and guardianship. If you are in need of estate planning, I would be pleased to assist you. © 2013 by Marlene S. Cooper. All rights reserved.