Carissa Giebel column: Estate planning more than just a will
6:49 PM, Oct. 28, 2013 |
Often when people think of estate planning, getting a will done is the first, and sometimes only, thing that comes to mind. However, estate planning entails more than just a will.
Unfortunately, many people never get a will done, some fail to get an outdated will updated, and some get a will done with no further planning, failing to coordinate their plan.
Many people who do get wills drafted do not realize how the will coordinates with their other planning. Some planning can override the will.
For example, if your beneficiary designation form for your life insurance policy names Sally as beneficiary, Sally will receive the entire death benefit of the policy, even if your will says to give only half your assets to Sally and the other half to Johnny. This applies to any assets that have named beneficiaries, including retirement accounts, annuities, investment accounts, savings accounts, etc.
If you own real estate with one or more persons, and title is held as joint tenants with right of survivorship, the real estate will go to the surviving owner(s), and not to the beneficiaries named in your will. This is why it's important to make sure title is held properly to accomplish your goals.
An important part of estate planning is planning in case of incapacity. Every adult should have both a durable power of attorney for finances and a health care power of attorney. These documents name a person to act on your behalf, if you are unable to act yourself, whether it is temporary or permanent. If you experience a period of incapacity and do not have these documents, a guardianship proceeding with the court is required to give someone the authority to act on your behalf. This can be time-consuming and costly during an already stressful time in your loved ones life.
Sometimes a trust can be a useful estate planning instrument, depending on what your goals are. A trust can avoid probate (which is the court proceeding that administers wills), which can save time and money for your beneficiaries. Trusts can also be used for potential tax planning or providing asset protection for your beneficiaries, such as protection in the case of a divorce, lawsuits, bankruptcy, or other creditors. Trusts are also private, unlike wills, so there are less challenges and disputes.
Some people are interested in doing planning to try to protect their assets in case long-term care services are needed someday. Perhaps you have a family cabin, some land, or another asset that is really important to leave to your beneficiaries. Sometimes planning can be done to provide protection for those special assets.
There are forms that can be found online or through computer programs that offer to assist you in creating your legal estate planning documents. This is not a wise route to take, as you do not have legal counsel to explain the options to you and how the options can affect your plan. If errors are made, the documents could be found invalid and tossed out by the court. I strongly recommend you meet with an attorney you trust to discuss the options to accomplish your goals.
Now is the time to get your planning done if you haven't yet, or reviewed if you haven't done so in the last few years. Effective planning can be a huge gift to your loved ones.