What’s the First Step in Estate Planning?

“Dealing with the death of a loved one is hard enough. Estate planning can make things easier on a grieving family.”

As you may have read, a recent study revealed that 56% of Americans die without a will or estate plan. That’s staggering, and it tells us that the importance of creating and updating a will cannot be minimized.

Kiplinger’s recent article, “How Wills and Trusts Work, and Where to Start,” suggests that you think of estate planning in two basic categories: the death side of legal documents and the living side of legal documents.

Everyone has three basic options for legal documents when they die: (1) do nothing; (2) draft a will; or (3) create a trust.

First, if you don’t have a will, you will die “intestate.” The state’s laws will determine who gets your property. The second and far better option is drafting a valid will with the help of an estate planning attorney. Don’t try to create a valid will on your own. The details are too important. A will must go through probate. While some may contend that probating a will isn’t a big deal in their state, it may be a big deal depending on your circumstances.

What about trusts? The purpose of a trust is to avoid probate and make it easier on the remaining spouse and heirs to settle your affairs. A revocable living trust can be an excellent choice. Part of this includes having the names removed from the assets and retitled into the name of the trust. The grantor (creator) of the trust is still in control as the trustee. The trust “owns” the assets, but you still make all the decisions for assets in the trust.

A trust isn’t the solution in all situations. A will is perfect for families who don’t own a home or any real property assets. Banking accounts or investment accounts have to be distributed. You usually make those P.O.D. (pay on death) or T.O.D. (transfer on death) accounts to simplify things.

The “living documents” are valid while you are living and they die when you do. These living documents create a list of people in order of those you want to make decisions on your behalf, if you are incapacitated. The documents protect your family from having to go to court to be appointed your legal guardian, which can be expensive and time-consuming. The basic living documents are:

Durable power of attorney for finance;
Medical power of attorney with a HIPAA waiver;
Living will;
Guardianship document for adults, which appoints a guardian of your person and a guardian of your estate;
Declaration-of-intent document stating that you intended to put all your titled and non-titled assets into your trust; and
Certificate of trust stating the trustees and successor trustees.

The most important reason to do all of this planning is to help make it easier and less stressful on your family, if you can't make decisions while living and, after you die, to make the estate settlement process easier on your loved ones.

Reference: Kiplinger (May 2017) “How Wills and Trusts Work, and Where to Start”