Thinking about one’s own death or disability are topics most people avoid as long as possible. However, death and disability are two of the most important reasons for creating an estate plan. You want to protect yourself and your loved ones. With proper estate planning, you can safeguard your finances during your lifetime, as well as direct how your finances will be handled upon your death or disability. Comprehensive planning can give you much-needed peach of mind and spare your beneficiaries the anguish of dealing with the expense, delay, and frustration that come with wrapping up a loved one’s estate.
- Giving the proper notices to proper parties
- Collecting the decedent’s property
- Receiving claims against the estate
- Paying valid claims and disputing others
- Distributing estate property according to the will or state law
- Selling estate property to cover debts or allow for proper distribution if necessary
If you have minor children at the time of your estate planning, it is important to address issues regarding their upbringing in the event of your incapacity or death. If your children are young and your financial situation provides for advanced planning, you may want to implement a plan that will allow your surviving spouse to devote more attention to your young children without the burden of work obligations. You may also want to provide for financial counseling and resources for your spouse in the event he or she lacks the experience or ability to handle financial and legal matters.
If you and your spouse die simultaneously or within a short duration of time, you should have a contingency plan that validates your joint decisions regarding who will manage your assets, as well as a nomination of a guardian for the upbringing of your children. It is not necessary that your financial manager and the guardian of your children be the same person. However, if you do not make the decisions yourself via estate planning documents, a court will decide how your finances are managed and who will raise your children, often with the undue burdens of reporting to the court and other court-designated restrictions.
Proper estate planning gives you the opportunity to determine how your children receive your assets. You may designate that the assets be distributed directly or alternatively placed in a trust to be distributed based on a number of factors which you designate, such as age, need, education, behavior, and achievement.
Placing the assets in a trust avoids the problem of children receiving substantial assets prior to achieving the level of maturity they need to properly handle inherited wealth.
Normally, personal representatives or trustees of an estate administration are entitled to be reimbursed for any out-of-pocket expenses they may incur during the process of managing and distributing the decedent’s estate. Additionally, they may be entitled to statutory fees that may vary according to locale and size of the estate.
The personal representative or trustee is expected to fulfill his or her fiduciary duties with the utmost integrity. Failure to do so may result in his or her liability for mismanagement of estate assets. It is advisable that the personal representative or trustee retain an attorney and an accountant to guide him or her through the somewhat daunting process of administering an estate. Fees for attorneys and accountants are paid from the estate’s assets.
When you are mentally incapacitated, you are no longer able to manage your own financial affairs. Many people assume their spouse or children will be equipped to handle financial matters on their behalf. This can be an expensive and inaccurate assumption. Without proper documents in place, a person’s spouse or children must petition a court to have the person declared legally incompetent – a process that is long, costly, and stressful for all concerned. Once declared incompetent, the court will appoint someone to handle the person’s affairs, and it may not always be someone he or she would have chosen. The court may even require the appointed financial manager to return to court yearly to account for every penny being spent or invested. This can result in more costs and frustration for the incapacitated person’s loved ones.
Proper estate planning can eliminate these problems and confusion. If you want a certain member or members of your family to immediately assume the responsibility of managing your finances in the event you become incapacitated, incompetent, or deceased, you can make this designation in a variety of estate planning documents. Your fiduciaries should be people you trust, as they will have the authority to withdraw money from your accounts, pay bills, take distributions from your IRAs, sell stocks, and transfer property. Because a will does not take effect until you die, and a general power of attorney may not be sufficient, it is important to discuss your goals with an attorney.
In addition to establishing a plan for your financial well-being, it is equally important to establish a plan for your medical well-being. The law also allows you to appoint a trusted person to make decisions on your behalf regarding medical treatment options if you lose the ability to decide for yourself. Who will make decisions for you if you are unconscious as the result of an accident? With the proper documents in place, you can select this person or persons yourself and prepare them for that responsibility well in advance of the dilemma. Additionally, it is important to have a living will in place that informs others of your preferred medical treatment should you become permanently unconscious or terminally ill. The presence of a living will at such a time is a comfort to your medical representative, as they can rely on your stated wishes regarding how you should be cared for as the end of your life draws near.