Estate Plans 101: What They Are and Why We Need Them

Do you have an estate plan? Do you even need one? Let me explain why the answer to the first question should be YES and the answer to the second is DEFINITELY YES!

What is an Estate Plan?

An estate plan can mean different things to different people. In its broadest sense, it simply allows you to make some decisions now for when you are no longer able to decide for yourself, due to either death or incapacity. (In fact, most people have not fully considered a plan in case of incapacity.) An estate plan allows you to set out your wishes for your finances, medical care, and distribution of assets before the need arises.

Who Needs an Estate Plan?

Since none of us will live forever, there is a 100 percent chance that an estate plan will be needed. If you do not have an estate plan in place at the time of your death or incapacity, what happens then? The state you live in has procedures that go into effect if you do not have an estate plan of your own. And it’s a pretty good bet that the state’s plan will not be what you would have chosen for yourself.

Incapacity deserves significant consideration when developing an estate plan. A few years before my mother passed, she suffered a series of strokes. While totally alert, she was unable to talk or write. She needed assistance and she needed an advocate – someone to manage her medical and financial affairs and who had the authority to make the necessary decisions. Thankfully we had this planning done. I couldn’t imagine the additional burden on the family had we not taken the time to get her wishes, along with these important documents, in place.

Adults of any age need to plan for their physical and financial health. Single and married parents of minor children need to be especially concerned about the care and support of their children in addition to themselves. It’s best to talk to an experienced estate planning attorney to get an idea of what will be needed in your own plan.

Documents in a Typical Estate Plan

  • Will – Upon death, this governs who receives any property that is not in a trust or that will pass by a beneficiary designation (such as retirement accounts and insurance policies).
  • Revocable or Living Trust – Allows for management of your property while you are alive and allows property to pass to your beneficiaries without a court proceeding, known as probate. While you are alive this trust is “revocable,” meaning you can make changes to its terms at any time. Upon death it becomes “irrevocable,” meaning its provisions can no longer be altered. Trusts provide an added layer of control over assets that is not possible when assets are left outright to beneficiaries.
  • Health Care Surrogate – Allows someone to make medical decisions for you if you are no longer able to do so for yourself.
  • Living Will – Dictates end-of-life decisions related to what should or should not be done to keep you alive, if you are in a condition where you are unable to make these decisions yourself.
  • Declaration of pre-need guardian – If you become incapacitated, you’ll need a guardian to make decisions on your behalf for as long as the incapacity lasts. This document provides an opportunity to pre-determine whom you prefer to be your guardian (eliminating the need for family members or possibly a court being forced to make this decision.) While these documents have become legal fixtures in the state of Florida, estate planners have found such provisions to be of value in demonstrating an individual’s intent with respect to guardianship even in states without an explicit law.
  • Durable power of attorney – Confers the power to execute financial transactions on your behalf under specified conditions.

Every adult needs an estate plan. But unless you want to stick with the plan your state has set out for its residents, you will probably want to have one drawn up according to your wishes.

I am very grateful my mother took the time to create her estate plan. I firmly believe that with the right guidance, the plan you design for yourself will provide the best outcome for all concerned.