To ensure that your estate plan is going to protect you, you must be sure that your estate planning documents are legally enforceable and will:

  1. Handle your affairs when you are incapacitated.
  2. Transfer your assets to your loved ones when you pass away.
  3. Keep transferred assets from causing harm to the beneficiary.

When the financial world discusses Estate Planning, the phrase usually is related to your retirement, savings and investments. As an Estate Planning Attorney, I am referring to something else entirely. As important as your financial life is I believe everyone should have an estate plan that addresses the three issues listed above.

Area 1 – Handling Your Affairs When You Are Incapacitated

If you become sick or suffer a debilitating injury, you might become incapacitated. If you’re in a coma, you lack the ability to manage your own affairs.

Very few people unconscious in a hospital for long periods of time can pay bills and deal with their finances. Someone who has been legally authorized to act for you in the financial arena is needed. This is where a Durable Power of Attorney comes in to play.

You can sign a Power of Attorney while you’re competent appointing a person to be your “agent”. If you are incapacitated and never executed a Power of Attorney, your loved ones have a problem. They can’t act for you without first going through a lengthy court process to be appointed as your Conservator.

Your agent under a Durable Power of Attorney can deal with your bank, credit union, or other financial institutions to ensure that your bills are paid. It is always nice to recover from a long stay in the hospital in a house that wasn’t foreclosed on because your agent was able to use your savings to pay the bank.

Area 2 – Transferring Assets To Loved Ones When You Pass Away

Unfortunately, everyone will shuffle off this mortal coil at some point. Is this the time when your loved ones should be struggling with your affairs because of a lack of planning? If your Estate Plan is in place, there are that many fewer things for your loved ones to have to deal with.

As part of any good estate plan, you should check all of your financial accounts (savings, checking, money market, mutual funds, insurance policies, IRA’s, etc.) to ensure that you have named the correct beneficiaries. If you opened an account many years ago and have since gotten married, divorced or had children, your beneficiaries need to be updated.

A Last Will and Testament is a necessity for you if you have children under 18 years old. This is the place to name the people you want to take care of your kids if you’re gone.

A Will is a set of instructions to the Court from you. If you don’t have one the Court won’t know what you wanted. A judge doesn’t know your kids or who would be best to care for them; you need to have a Will to make your wishes known.

A Will is also the traditional place for naming the people who you want to receive your assets upon your death. This is what most people think of when first beginning the Estate Planning process. Having a Will naming beneficiaries is much better than having no Will and letting State law control your estate.

A Will as part of a larger Estate Plan is better still. Many Estate Plans would benefit from a Revocable Living Trust in addition to a Will. A Will must go through the Probate Court process. This may take many months and can be very costly. A Trust avoids probate entirely and generally costs your Estate much less than Probating a Will.

Area 3 – Keeping Transferred Assets From Causing Harm To The Beneficiary

You want your assets to benefit your loved ones, everyone does. You want your loved ones to actually receive as much of your Estate as possible, without Probate costs, attorney fees or taxes. Your Estate Plan should also make sure that your loved ones are benefitted by your assets and not harmed.

  • If you leave a lump sum of money to someone who happens to be in their twenties, it is a good bet that the money will be spent quickly and less than wisely.
  • If someone is disabled and receiving means-tested governmental benefits, even a small amount of assets could cause their benefits to be lost.
  • If you leave someone with dependency issues any amount of cash, it is almost always a bad idea and ends poorly.
  • If a beneficiary is under the age of 18, there is always a question of if the assets will be used properly.

A good Estate Plan addresses all of these issues and should include:

  • Revocable Living Trust
  • Last Will and Testament
  • Durable Power of Attorney
  • Advanced Health Care Directive