Estate Planning

By Gregg DeVilbiss,
Kentner Sellers

Equity markets are falling. 401k accounts are looking more like 201k accounts. Real estate values are falling. Businesses are laying off workers. What does all this economic and financial chaos mean to me, my loved ones, my wealth and my estate plan? What if I don’t have an estate plan? Then what happens? Those are questions people are frequently asking now.

Let’s start with the question: What is an estate plan? Traditionally, an estate plan has been thought of the statements of intentions expressed in the documents used to transfer the assets and remaining income streams (example: survivor pension benefits) to the people and entities specified by the person who died. The documents usually also direct how to satisfy all debts and taxes owed by the decedent.

How does a person create an estate plan? Most often people hire a lawyer to prepare a Will, which directs how debts and taxes are to be paid. The Will also directs the people and organizations who are to receive the remaining assets. Many people have both a Will and a trust, which is usually a revocable trust. Those documents direct where existing income streams and assets are to pass at death. If a trust is part of the plan, assets can be maintained in the trust with income and principal paid out to people or organizations as the deceased person specified in the trust. If the income stream has dried up or the assets are no longer owned, then the provisions of the Will or trust related to them accomplish nothing.

What other documents may be advisable? Many individuals also execute a document called a Power of Attorney which allows a chosen, trusted person to do certain acts for them during lifetime; this document can prevent a guardianship from being required. Many estate plans also include a Health Care Power of Attorney or Advanced Health Care Directive in which an individual is named to make decisions about the health care to be provided to the person signing the specialized power of attorney. A Living Will may be important to people who want to specify the medical treatment they do not want applied to keep them alive. For some people more complex documents may be appropriate or required to accomplish what they want.

Why do most people create estate plans? In my experiences, people generally know their assets, liabilities and their sources of income. However, sometimes they did not truly know what they owned, why they owned it or how they owned the asset. But what they have always known and wanted to talk about have been the people who mean the most to them in this life.

They have spoken of the dreams they have for their loved ones and of the opportunities they want to create or preserve for them such as continuity of lifestyle for the surviving spouse, college education for children and grandchildren, keeping the family business in their family and, just as importantly, in the hands of those best able to lead it, and providing adequately for someone needing special care. Creating a “family bank” of assets available for loved ones to manage and use as good stewards should.

They have spoken of their fears. Fear of burdening loved ones should they need care. Fear of outliving their income and assets. Fear that the family may quarrel over how the family business is to be owned and operated. Fear that loved ones may miss opportunities. Fear that income and estate taxes may require critical assets be sold.

What is the outcome they really want? A friend recently shared with me what has motivated him and his wife in their planning. As he said, “My wife and I have given our love to our children every day of their lives. Our love never stops. We have done our best to instill values that will cause them to lead lives of success and significance. The kids are not perfect, but they get it. We structured our wealth transfer plan to give them incentive to increase the significance of their lives as well as provide each of them greater capacity to capture opportunities and minimize disasters in their lives.

“And we have created funds for two charities we have supported financially as well as with our time and talents.

“So what do we get out of this plan? We have peace of mind – peace of mind that we have abundantly planned for each other’s well-being. We have peace of mind that our children and their children – the people who create the greatest joy in our lives - will have greater capabilities and capacities in their lives. We have peace of mind that deserving people we do not know will experience a life made a little better because we cared and shared. Yes, we have peace of mind because of our plan.”

Peace of mind. Estate planning can involve several types of documents and many types of financial decisions, and some may not be easy decisions. However, I believe the folks who create an “estate plan” have as their premier goal the peace of mind that comes from knowing the right actions will occur in the right ways at the right times in the lives of their loved ones.

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