By: Norman Handler, Esquire
Published: May 21, 2018
Estate planning often falls to the bottom of our “to-do list”, because it is not a pleasant thing to think about and because none of us expect to need it anytime in the near future. And the probability is that most of us will not need it in the near future. But estate planning deals with possibilities, not probabilities, and it is possible that the need will arise. We have to plan to care of ourselves and our families, just in case the need does arrive sooner than expected.
Many people assume that estate planning is nothing more than “if I get hit by a car on the way home from work today, I need a Will so that I can pass my assets to my intended beneficiaries”. While having a Will is one piece of an estate plan (granted, a very important piece), it is by no means the only piece of an estate plan. This article will summarize all of the pieces.
During your lifetime, you need several different documents in case you were to become incapacitated:
- Power of Attorney, so the person of your choice would be able to manage your assets for you; in the absence of a Power of Attorney, the Court would select someone (who might not be a trusted family member) to do so for you, after a long and costly procedure.
- Health Care Directive, so the person of your choice would be able to make medical decisions for you; in the absence of a Health Care Directive, the doctors generally do not have to abide by the wishes of your family, especially when different family members have different opinions as to how to how to manage your health matters.
- Temporary Guardianship Document, if you have minor children, so the person of your choice would have the legal authority to make medical and legal decisions for them while you are unable or unavailable to do so yourself.
Following your death, a Will is not the only method to pass your assets to your intended beneficiaries, there are actually 3 different methods of passing those assets:
- Joint property does not pass under your Will but rather, to the surviving joint owner by the title of the asset.
- Beneficiary Designation Assets (life insurance, pensions, annuities, Thrift Savings Plan accounts, IRA’s, etc.) also do not pass under your Will but rather by a form called a beneficiary designation.
- Only assets in your name alone pass under your Will.
Estate taxes also play a role in estate planning. All assets passing at your death are potentially subject to Federal and State estate taxes, except:
- The taxes are assessed only against your net estate, after funeral expenses, mortgages and other debts, and post-death expenses
- Any amounts passing to a U.S. citizen spouse or qualified charitable organizations are not subject to the tax
- Any amounts below the “tax exemption amount” are also not subject to the tax
— Federal exemption is currently $11,180,000 for a single person, and $22,360,000 for a married couple
– About a dozen states have state estate taxes, with exemptions varying between $1 million and $5,000,000 +
Probate – the government supervision of the executor properly doing his/her job, is relatively simple in some states but more complicated in other states and situations. In those later cases, consider a somewhat more complex approach to estate planning called a revocable living trust, where you put your assets into a trust so that they are not subject to probate.
After completing these documents, put your documents away in a safe place but don’t forget about them: circumstances, as well as the law, are constantly changing. Therefore, you should periodically review your estate plan (at least every 3 years, if not sooner, especially if you move to a different jurisdiction) to be certain that it remains current.
It is never too soon to begin doing your estate planning. When my daughter was 18, a friend of hers was killed in a traffic accident. I will never forget what she said to me between tears – “18 year old kids are not supposed to die”, to which I replied “and people my age are not supposed to die either – yet”, but these things happen. So get started on your estate planning now.