Did you know that you already have an estate plan in place, even if you don’t yet have a Will or Powers of Attorney? Your present estate plan, designed in part by your choices and in part by the Commonwealth of Pennsylvania, includes how things you own and the beneficiaries you’ve designated on insurance or IRAs can be accessed now, and distributed after your death. So what “more” do you need, and why do you need it?
You need it because what’s at stake is everything you’ve ever worked and saved for, and the future of those you love. But while your present estate plan elements, under your existing deposit agreements (at the bank, IRA and insurance contracts etc.) and as mandated by the State, they may address what happens after you die, they do not address issues of disability or incapacity while you are alive. All of your wealth can be at risk without the right planning. The “what more“ starts with Wills, Powers of Attorney and often Trust provisions or agreements.
Most people agree that life goes better with planning. Every one of us plans constantly, daily and in the short term, and for the more distant future. We plan and act in advance to prevent problems and in case something goes wrong. Homeowners insurance and having a spare tire in your car illustrate the idea – even though we rarely need them.
Estate planning means making legal plans and arrangements with tools like Wills and Powers of Attorney, Trusts and deeds, to maintain your best life when things are going well, and setting down directions and guidance in case anything bad happens to you, like death or disability. It’s all about making your own choices, writing it down and signing it to make it stick later.
You get to choose HOW your wealth is safeguarded and enjoyed; WHO you want to help you if you need assistance; and WHAT you want them to do to help you. The goals of estate planning also include preserving your wealth generally, making sure the right people inherit from you in the right way, and saving taxes and administrative costs during periods of transition.
What happens if bad events occur before we’ve done the right kind of legal estate planning? What’s the risk? If you are disabled without powers of attorney in place, whoever is going to help – often even your own spouse! – has to go to court and bring proceedings before a judge to be officially appointed as your Legal Guardian. Even worse, the Court may appoint someone to be in charge of you whom you know you don’t want, or even a stranger.
If you die without making good arrangements in advance, your estate might be inherited by the wrong people, or someone might be in charge of winding up your affairs who you really don’t want. Your heirs and family might argue and fight, in ways that can easily be prevented.
Trusts are mysterious to many, but they are not just for the rich. The idea of trusts describes a very broad range of uses and applications. Every trust though is a triangle or three-way transaction. The three players are the trust creator, the trustee, and the trust beneficiary.
The simplest example is when parents include “testamentary trust” provisions in their Last Will and Testament so some other responsible adult – someone they have confidence in, someone they trust – can help their young children if the parents die too soon. Other common examples include a revocable trust that we create during our lifetime, a so-called “Living Trust” that helps avoid probate and accomplish other estate planning goals when we are gone. Trusts are also used to give to charities while retaining financial and tax benefits for the donor. A Irrevocable Trust is generally intended to separate the person from ownership or control of the money in some way, such as for tax or benefits eligibility purposes.
To make estate planning arrangements like a Will or Power of Attorney you need to have mental capacity to know what you’re doing, to make a sound and independent decision.
Estate planning is not just for older people. Younger people become incapacitated or die young sometimes, too. Younger people also often have young children to plan for.
The law of estate planning is generally more static and stable and doesn’t change very fast, but it does change sometimes. More frequently, your circumstances concerning your family or your finances may change.
There’s also a lot more in common than there is dramatically different in the estate and trust laws of one state compared to others. Nonetheless, if you move to a different state, it can be a good idea to have your old estate planning reviewed in your new state.
At Marks Elder Law, we help people daily with issues like these. I invite your questions and feedback. Please let me know how I can help you and your family.