There is a perception that Estate Plans are something that only the very wealthy need to worry about, with their complicated financial affairs and portfolios of assets. After all, we often use the term “estate” to refer to a large mansion located on a landscaped property. But in legal terms, “estate” refers simply to every asset – and every liability – that is owned by an individual, particularly at the point of their death. 

In addition, people often equate the term “Estate Plan” with “Will.” Thus, they see an Estate Plan as being a very simple proposition. If the most significant assets are a house and a bank account, they may just tell their children: when I die, sell my house, add the money to my bank account, and divide up the proceeds evenly. They may even add in a few other small requests: you get the car, you get the watch, and you get Mom’s engagement ring. As far as it goes, the plan may be perfectly sound in terms of expressing the parent’s desires, and the children may even all be on board. But the harsh reality is that, without an Estate Plan in place, it is highly unlikely that things will turn out the way they want.

An Estate Plan is Much More Than a Will

There are several problems with the scenario outlined above. First, without a Will in place, the children may not be able to do what the parent wants them to do – at least, not very easily. Even something as simple as transferring title to a car cannot happen without some legal proof that the person attempting to register it has the legal right to do so. The fact is, in order to carry out the parent’s wishes, the children will have to go through a pretty lengthy legal process. If no Will exists, property will be passed to the children by operation of the state’s intestate laws, which means that a court will administer the estate, and the children will have little to no control over how the court handles it. 

But even with a Will in place, the estate will go through a probate proceeding, in which creditors and any other claimants will participate. Again, the process could take quite a while, and it will also entail fees that will be paid by the estate and may reduce the amount that gets passed down to family members.

Make Sure Your Wishes Are Carried Out

The scenario above, however, has even larger problems. An Estate Plan is much more than putting together a Will – although a Will can be an important component of a good Estate Plan. An Estate Plan encompasses several documents and is really that: a plan. It is not just about what happens when you die but makes provisions for how you take care of yourself for the rest of your life, take care of your loved ones, and make sure your wishes are carried out when you die. The most effective plans are ones created not just with an estate lawyer, but with a financial advisor and a CPA, as well, who can help you craft a plan that achieves all your objectives both while alive and after you are gone.

Even a very simple Estate Plan will include a Will or Trust (or both) to handle the distribution of property upon a person’s death, but it will also include things like an Advance Medical Directive, a Durable Power of Attorney (DPOA) for financial matters and/or medical care. Why?

Not everyone will go along happily into old age, and then peacefully die at home. In fact, today, with modern medical science, people are living longer. But aging usually comes with increasing degrees of debility, both physical and mental. As people go through these stages, they will need help and support.

A comprehensive Estate Plan can address these contingencies. Even if a parent has outlined to his or her children how they would prefer to be taken care of in old age, it is sometimes thoughtless, and often presumptuous, to assume that these burdens can be easily handled. 

An Advance Medical Directive legally expresses an individual’s specific instructions on what medical interventions are desired under certain circumstances. For example, it can direct that an individual does not want to be revived or undergo surgery in the event of cardiac arrest. As simple as it sounds, that sort of instruction relieves children of the heavy emotional burden of having to make these sorts of decisions on behalf of a parent. Instead, everyone can proceed with confidence, knowing that the decision was already made by the person who is most concerned.

DPOAs are also critical. As people age, they often lose the ability to manage their own affairs prudently. Not only may elderly people make bad financial or medical decisions for themselves, but, unfortunately, elderly people are often taken advantage of, not only by scam artists but sometimes even by people who are close to them. The fact is, even the most well-meaning charity in the world may not realize that the elderly lady writing them a check really cannot afford to be so generous without risking her own solvency.

Without a DPOA in place, a child will have to apply for guardianship or conservatorship to step in and take care of a parent who cannot handle his or her own affairs. In contrast, a designated DPOA has the legal authority to handle a debilitated individual’s affairs just by operation of the legal document. Even more, an individual can choose who acts as DPOA, and not have to take a chance on a court’s judgment of who should best assume that role, or introduce discord among family members who may argue about who ought to make these decisions. The individual also has the ability to appoint more than one person to act as DPOA and can divide up responsibilities among different people. For example, a child who is adept at financial matters can be appointed to handle all financial matters, and another child can be designated to handle medical decisions.

There are other considerations, as well. If both parents are alive, and only one parent dies, intestate laws do not always protect the surviving spouse, even if that is what the deceased person wanted to happen, and even if the rest of the family agreed. To make sure that assets are used in the way a person wants, a Trust is one of the best vehicles to use. Not only can a Trust be used in place of a Will to devise property to heirs, but it can also be used to support a person during his or her own lifetime, as well as a spouse during that spouse’s lifetime. Unlike a Will, a Trust can be used to manage an estate from the moment it is created, rather than operating only upon death.

Another advantage of creating an Estate Plan is that it avoids disputes that arise as a result of unanticipated problems. Even if the rest of the family seems to be fine with a verbally expressed plan, there is no telling what will happen down the road. Siblings may become estranged, or have different memories of what a person wanted or intended. By getting your desires, intentions, and plans on paper, there is little room for confusion or dispute. An Estate Plan can actually help your family to maintain harmony after you are gone by eliminating problems that arise from misunderstandings or ill feelings.

If you would like more information on putting together an Estate Plan, contact eLegacy today. We have simplified programs that can help you put an Estate Plan in place at a very reasonable price, and we can assist you in finding financial advisors to help you create the plan you want. Taking care of your affairs now can give both you and your family peace of mind, knowing that your wishes will be carried out in the future.