October 17-23, 2022 is “National Estate Planning Awareness Week” so it seemed like the perfect time to remind everyone the importance of having your “ducks in a row” with regard to your estate plan.
As estate planning lawyers, we’re routinely asked “Do I really need a Will, and if so, can I do it myself online?” The short answer is, “YES”, you need a Will, and “NO” you shouldn’t try to do it yourself. Actually, what you really need is an estate plan, which should include (at a minimum) a Will, a General Durable Power of Attorney for finances, and a Health Care Power of Attorney. For many families, a trust is another appropriate planning tool for various reasons. Which of these documents are appropriate for you and your family should be determined on a case by case basis (this is definitely not a one size fits all endeavor), so it’s truly crucial that you sit down with an attorney who is experienced with estate planning and who will really take the time to look closely at your goals and how best to accomplish them. If you try to take shortcuts or save cost by doing it yourself online, you are likely to waste money on a plan that doesn’t actually accomplish your goals–and may not accomplish anything at all. Starting over later to complete a new plan that actually suits your needs will just result in paying twice–or even worse, if you die with a plan that isn’t sufficient, the cost of cleaning up that mess could be substantial.
Here is a closer look at the fundamental documents that make up a comprehensive estate plan.
Last Will and Testament: A Will is a document that lays out instructions regarding what happens to your money after you die. A common misconception is that a Will controls what happens to every asset you own on your date of death. The truth is, a Will is only read in Probate Court, so it only controls accounts that are considered “probate assets.” An asset is a probate asset if it was owned individually by the deceased individual, without any designated beneficiaries, joint owners, or trust ownership. Your Will should specify who will receive any money that is part of your probate estate. Your Will also designates someone to serve as Executor. The Executor is responsible for carrying out the terms of your Will by paying any valid debts and then distributing the remaining money to the people you’ve named as beneficiaries. Your Executor is only authorized to act on behalf of your estate after being appointed by the Probate Court–so if you avoid Probate, your Executor does not have any authority at all.
General Durable Power of Attorney (“GDPOA”): A GDPOA is a disability planning document that is important during your lifetime. Incapacity planning is one of the most overlooked parts of an estate plan. The person you name in your GDPOA to serve on your behalf is called your “Agent.” A comprehensive power of attorney will give your Agent the broad authority to do anything that you could do for yourself related to your finances. In addition to being a crucial tool in the event of an emergency (you want to make sure your bills are still paid if you’re laid up or otherwise incapacitated), practically speaking, a GDPOA can be really helpful from a convenience perspective too. Imagine your spouse has a credit card in his name only, but he’s traveling for work and you need to speak to someone from the credit card company about your bill. If they won’t talk to you because you aren’t the cardholder, just email them a copy of your GDPOA, and you should have full authority to deal with the credit card company.
Health Care Power of Attorney (“HCPOA”): Just like a GDPOA, a HCPOA is a disability planning document. In the event of an emergency, your HCPOA designates a person to make medical decisions on your behalf. Unlike the GDPOA, the HCPOA isn’t effective until you are unable to make your own decisions. This is something that you’ll be asked for any time you go to the hospital, and it’s a good idea to circulate it around to any doctors that you see regularly so they can add it to your file. In conjunction with a HCPOA, many people decide to also sign a Living Will Declaration, which is basically a medical directive that instructs your doctors not to take extraordinary measures to keep you alive if nothing else can be done to save your life.
Revocable Living Trust: Many people incorrectly assume that there is a magic number net worth that you should have before incorporating a Revocable Living Trust into your estate plan. This couldn’t be further from the truth! For example, many young couples with children choose an RLT in order to protect their children’s inheritance. Imagine a couple dies unexpectedly in a car accident and leaves behind two minor children. Each spouse had a life insurance policy with a $500,000 death benefit. Without a well-drafted estate plan, the minor children could each receive $500,000 outright at age 18, no strings attached. What would you have done with that kind of money at age 18? With a Revocable Living Trust, you can spread the distributions to children out for as long as you desire (for example, give them 25% at age 25, 50% of the remainder at age 30, and the remaining balance at age 35). Trusts are also important tools for people who are planning for a beneficiary with special needs, spending issues, addiction issues, or a myriad of other concerns.
There are so many different factors that should be considered when developing a plan to meet your family’s specific estate planning needs and goals. We encourage you to take the first step and call an attorney to discuss your estate plan. It’s well worth the expense–because you can’t put a price on the peace of mind you’ll get from knowing that you and your family will be protected no matter what curve balls life may throw at you in the future. An excellent estate plan is truly the best gift you can leave to your loved ones.