Estate Planning


Proper estate planning may be the difference between providing your heirs with a comfortable inheritance or a major financial headache.

When you think of an estate, you probably think of a mansion on a large piece of property. Estate planning sounds like it might have something to do with how to buy the mansion, but it actually defines what you want to happen to your assets after your death. While no one wants to think about dying, it’s important to have a plan in place to ensure your wishes are followed.

It’s important to have a basic estate plan in place regardless of your net worth. Although it may seem like a morbid chore, estate planning offers several benefits:

  • You get to name the people to whom you wish to give your assets – and your wishes will be legally binding.
  • You can arrange it so that taxes siphon as little as possible from your estate.
  • You have the satisfaction of knowing that your financial affairs are in order, so you won’t bequeath a costly administrative nightmare to your loved ones.

An estate plan can include several elements:

  • A will. A will is a legal document that lets you tell the world who should receive which of your assets after your death. It also allows you to name guardians for any dependent children.
  • Assignment of power of attorney, which gives the person you name the authority to manage your financial affairs if you are unable to do so.
  • A living will, which is a statement of your wishes for the kind of life-sustaining medical intervention you want, or don’t want, in the event that you become terminally ill and unable to communicate.
  • A healthcare proxy, which authorizes someone you trust to make medical decisions on your behalf.

What is the Difference between Estate Planning and Elder Law

Estate planning attorneys always advise clients to review their estate plans every five to ten years, but who does that? Most people prepare an estate plan when they have children, again when they near retirement, and finally when and if they or a spouse becomes ill or begins to show signs of dementia. If you prepare and update your plan at these three junctures, you and your family will probably be in good shape. But if you don't, there's a strong likelihood that your documents will be out-of-date when needed, causing extra cost, delay and stress to your family.

In many cases, however, you should review and update your plan somewhat more often. Here are 10 reasons to review your estate plan:

1. You have experienced a changes in your health or family circumstances.
A marriage, a divorce, a death in the family or an illness or a disability can all be reasons to update your estate plan. The person you appointed as agent on your health care proxy can no longer serve in that role. You don't want your ex-spouse to receive all of your estate when you pass away. Your daughter's marriage is troubled. It's time to review your plan.

2. The people you have named as agents on your health care proxy and durable power of attorney or as trustee or personal representative are no longer appropriate.
Your health care agent moves to another state. Your attorney-in-fact under your durable power of attorney declares bankruptcy. Your sister who you named as executor of your estate has had to move to a nursing home. It's time to review your plan.

3. Your financial circumstances have changed significantly.
Your company finally went public and now your have a taxable estate. Or, you haven't quite got your feet back on the ground since the 2008 recession, so your savings and investments aren't quite what they once were. That bequest to your alma mater no longer makes sense. It's time to review your plan.

4. Your durable power of attorney is more than five years old.
Did you experience pushback when you went to use your mother's old durable power of attorney at her bank? Did they say that it was too old? If so, this was contrary to law. There's not statute of limitations on durable powers of attorney. But many financial institutions in effect create them by refusing to honor older documents. You can fight them, but it's not easy. If your durable power of attorney is more than five years old, it's time to review your plan.

5. One of your beneficiaries has experienced or may experience financial difficulties, divorce or a serious illness.
Your daughter's marriage has become troubled. Your nephew has been diagnosed with MS. Your son had to declare bankruptcy. Unfortunately, your grandson is struggling with drugs. It's time to review your estate plan.

6. One of your beneficiaries has become disabled or has passed away.
Your nephew's MS has worsened so he must apply for Medicaid coverage. Your niece passed away leaving three minor children. It's time to review your estate plan. (Sorry about these morbid thoughts.)

7. You have moved to a new state or country.
Estate planning is a creature of state rather than federal law. While under the full faith and credit clause of the constitution, every state is supposed to honor your legal documents drawn up in another state, every state's laws are different. Some states honor living wills, some do not. Some require witnesses on a durable power of attorney, some do not. Some have an estate tax, some do not. And that's just within the Unite States. The rules differ even more from country to country. So, if you've changed states or countries of residence, it's time to review your estate plan.

8. It has been more than five years since you have reviewed the beneficiary designations on your retirement accounts and life insurance policies.
The beneficiary designations on your retirement accounts, life insurance policies and investment accounts can be just as important as your estate plan. Unfortunately, people often don't remember what they say or they can be inconsistent with estate plans. We've seen many cases where life insurance passes to an ex-spouse or ex-partner because the deceased never got around to making a change. If you don't have all of your beneficiary designations in a folder at home, it's time to review your estate plan.

9. You have separated or divorced from your spouse or split with your partner.
Any change of relationship status is likely to mean that you will want to change who gets your estate and who will act for you in the event of incapacity. It's time to review your estate plan.

10. You have gotten married or are in a new significant relationship.
On a brighter note, a positive change in relationship status also means, it's time to review your estate plan. As my partner, Jeffrey Bloom says, you don't buy life insurance because it's likely that you will pass away during the next few years, but because you are responsible and need to make sure your family is taken care of when you can no longer do so. The same goes with estate planning. You don't prepare and update your estate plan because you're likely to pass away or become incapacitated any time soon, but why roll the dice when you can be certain everything is arranged as you want should worse come to worse.