No one likes to face the emotional and practical questions of estate planning. And yet, a well-crafted plan with properly prepared documents can create peace of mind today and prevent conflict and confusion later.
Estate planning isn’t a one-size-fits-all proposition, says Vicky Ann Trimmer, an experienced estate attorney with Persun & Heim, P.C., Mechanicsburg.
“What you want is different from the person sitting next to you,” says Trimmer. “Even husbands and wives sometimes have a complete difference of opinion in what they want to do.”
Start with these three steps:
- Information gathering: Build a list of assets and whose names they’re under. Planning differs depending on whether assets are in one spouse’s name or two. “A lot of times, folks don’t know how things are titled because they haven’t looked at their deed in 50 years,” says Trimmer. Rough values also help in determining whether federal taxes will come into play.
- Set immediate goals and objectives: Ask how affairs and assets should be handled during your lifetime, especially if you eventually need help paying bills and making decisions. Who are the people you’d trust to assist you, and what are their strengths?
- Establish goals for assets after death: Who should benefit: children, grandchildren, charities, faith groups? Will they be disbursed immediately or put into trust for later use?
Once the assets are listed and goals set, it’s time to draw up the documents:
- Financial power of attorney: This document gives selected others the power to write checks, pay bills, and make financial decisions. Individual circumstances dictate the details, such as shared responsibilities among siblings. “We can help be creative to come up with a solution that meets and accomplishes your goals,” says Trimmer.
- Health care power of attorney: The health care POA confers the power to make health care decisions in case of incapacitation. It can include a living will, also known as advanced care directives, specifying treatment that should be given or withheld.
- Will: This is the disbursement of assets to heirs and beneficiaries, the legacy that remains. Whether the assets go into trusts for long-term management can depend on the beneficiaries’ circumstances, such as age, disabilities, or money-management capabilities.
Don’t let the tax tail wag the planning dog. Develop the plan first, and then adapt it for tax purposes.
“Tell me what you want, and I will make it happen in the most advantageous way,” says Trimmer. “You can get so hung up on avoiding tax that when you get done, you have a great plan with no tax, but the things that Mom and Dad wanted didn’t happen.”
Keep the documents in a safe deposit box; home safes might not protect against the extreme heat of an electrical fire — and review them every three to five years, especially when life circumstances change. “The review may be as simple as reading the document” says Trimmer. Many changes can be made easily after a simple talk with the attorney. “If it still does what you want, stick it back in the safe deposit box.”