What is Estate Planning and Why is it Important
Updated: Mar 12
Everyone needs estate planning to some degree. Essentially, it is advanced planning for our death or in the event we are incapacitated. Most people think of wills, but estate planning is so much more. It's even more than just the distribution of our assets and outline what/who pays taxes on your estate after your death. Estate planning includes advanced healthcare directives, power of attorney, trusts and more.
The number one reason to start your estate plan now, is because when one is not available, the state will make one for you. Who receives what and how much will be determined by the laws of the state in which you reside. When you are unable to make your own medical decisions your state will also specify who, if anyone, is permitted to do so. For many of us, that doesn't sit well. In most states, even with just a will, your estate could be tied up in probate court; sometimes for years. Anything not listed specifically can be contested (think about Robin Williams and his personal belongings or Michael Crighton and his unborn heir). and we have seen in some cases where legal heirs must be determined by the courts.
In some extreme cases, it took YEARS to settle these estates:
Chadwick Boseman (2 years)
Prince (6 years)
Jimi Hendrix (30 years)
The common misconception is that you need to have an estate worth millions or a spouse and children to NEED estate planning. This couldn't be further from the truth. There have been quite a few cases where family members disagree over someone's medical treatment. In these instances, court battles ensue and the incapacitated person is either left on life support or in a vegetative state while the state decides their ultimate fate. Whether or not you have heirs, it is always recommended that you make your own decisions about your end of life care while you are of sound body and mind. For this, we include advanced directives, living wills, revocable living trusts and medical or healthcare power of attorney in your estate planning. Because, frankly, we don't believe those decisions should be left up to the state.
Having an estate plan gives you peace of mind knowing that the people YOU chose and trusted will carry out your wishes. Don’t let a legal system decide for you; make your own choices. If you stop making such choices, it will hurt both you and your family. Consider it in this manner. We all have “what if” protection on our homes, cars and sometimes other valuables when we buy insurance. Similarly, estate planning safeguards both the “what ifs” (if you are ever incapacitated) and the “when” (our future death). It is a wonderful gift to yourself and for your family, and that is irreplaceable. For more information contact Hoard Law today to get started on your estate plan! Remember, that they must be updated periodically AND immediately following a beneficiary's death or birth, a marriage or divorce, when you move or following any major life event (like domestic domicile, inheriting property and so on).
Here are some useful definitions about estate planning that you should know:
Advanced Directives – Instructions for your medical care in the event you are not able to make decisions for yourself (an example is a DNR or Do Nor Resuscitate , meaning you do not want to be placed on life support should your heartbeat stop or you stop breathing. Other directives can include organ and tissue donation, palliative or hospice care or DNI, Do Not Intubate.)
Beneficiary Designation – A transfer of assets on financial accounts, like retirement plans, life insurance, bank accounts and more. The beneficiary of these accounts will receive the distributions upon your death, irrespective to the terms of your will.
Durable Power of Attorney – Grants another party the right to act as your agent, or representative, in the matters of your private affairs, finances, business or any other legal matter. It may go into effect immediately upon execution of the document or when you become incapacitated and will remain so until death or cancellation.
Last Will and Testament – Also called a will for short; this is a legal document that outlines how you’d like your assets distributed and to whom custody of minor children should be granted upon your death. While a will outlines your intentions, they can be contested, or challenged, by a legal spouse, your children or anyone else who was mentioned in your current or a previous version of the document.
Living Will – A document of your directions to healthcare providers on how to treat you, if you are unable to speak for yourself. (Examples include if a pregnant person going into surgery provides documentation to save the unborn child should something go wrong or a person with a history of addiction asking not to be given opioids during their medical care.)
Medical or Healthcare Power of Attorney – Assigns a proxy, or a representative, to make medical decisions on your behalf while you are incapacitated. Make sure they are aware of your interests and if you have any advanced directives.
Probate – A judicial process that appoints an executor to manage a person’s estate upon their death. The executor, usually a representative of the state, will assess assets, debts, taxes and determine how assets are to be distributed.
Trust – A contractual relationship that allows another person or entity to hold title of property or assets and governs how and when they shall be distributed. The holder, also known as the trustee, will direct assets on behalf of the beneficiary until they are distributed. A revocable trust allows you to place the management of assets with a trustee while you are still alive and can be rescinded or altered. An irrevocable trust, however, cannot be altered once it has been completed. Irrevocable trusts offer the most protection for your beneficiaries.