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How to Get Your Estate Plan on Track

While the vast majority of Americans won't have a taxable estate ($22.4 million per couple under the 2018 Tax Cuts and Jobs Act) when they pass away, a little bit of estate planning with an attorney can go a long way toward avoiding potential issues for you and your family.

What an Estate Plan Accomplishes

A good estate plan accomplishes three objectives:

  1. Your end-of-life (health care) decisions are documented in a thoughtful, legally binding document.
  2. Your assets will be distributed according to your own desires and objectives, not those of state legislatures.
  3. Your family will avoid the time, expense and frustration of probate.

A basic estate plan should include advanced directives, such as a health care proxy and power of attorney, a “pour-over” will, and a revocable living trust. You can potentially save some money downloading some of these documents, but to avoid pitfalls and best protect your family it’s best to hire an attorney to make sure a professional knowledgeable in the nuances of trusts and estate law is looking at your specific situation.

Benefits of the Health Care Proxy and Power of Attorney

The health care proxy, also known as a health care power of attorney, accomplishes two objectives. First, it authorizes a designated person to make health care decisions on your behalf if you get sick or otherwise cannot make such decisions on your own. Without this designation, a judge would ultimately decide who authority in those circumstances. Second, the health care proxy allows you to document specific decisions relating to your health care, including end-of-life decisions. While today it is common for hospitals to provide their own health care proxy form upon being admitted, a legally binding health care proxy drafted and executed with an attorney must be accepted by all health care providers.

A good estate plan should also include a power of attorney. This document allows you to authorize one or two individuals to make financial decisions on your behalf. This document would be used if you are not in a position to handle such affairs on your own (similar to the health care proxy). In New York, all financial institutions are now required by law to accept the “statutory” power of attorney form.

Avoid Probate by Having an Estate Plan

Probate is a legal process wherein the State oversees the distribution of your assets and gives creditors an opportunity to collect on what’s owed to them. Going through probate can be a hassle for your heirs as there are costs incurred and procedures that must be followed before assets are distributed. In New York for example, probate takes at least a month and can be dragged out for over a year in some situations. Creditors have seven months to file claims against the estate.

Moreover, probate records are public; many celebrities have had their private wills shown online because they went through probate. The good news is that probate can be avoided with the right planning. You can title certain assets like bank accounts, brokerage accounts and property so they pass automatically and by operation of law to your heirs, thereby bypassing probate. Retirement assets are required to have beneficiaries and also, therefore, bypass probate. Be sure to have contingent beneficiaries so these assets continue to bypass probate if your beneficiaries predecease you.

Benefits of a Living Trust

The best way to bypass probate, however, is to take advantage of a living trust, which functions similar to a will in that it details how you want your assets distributed upon your death and is 100% changeable by you at any time. Here is how it works: upon executing the document, you go through the process of retitling your assets from your own name to that of your trust. Because no assets are owned in your own name when you die (they are owned by the living trust), there is no need to go through the probate process. This saves your family substantial time and money and keeps all records private.

If you execute a living trust but forget to transfer your assets – no worries. A good attorney will also have you sign a short, simple will, called a pour-over will, which merely states all assets not transferred to your living trust during your life should nonetheless be transferred to your living trust at death.

Estate Considerations for Parents

For people with kids, naming a guardian is probably the single most important part of your estate plan, and this aspect is addressed in your will. If you don’t have guardians named in your will and both you and your spouse pass away, the state will appoint a guardian, which can be disastrous for your children.

Estate Planning Special Circumstances

For most people, the above documents are enough to ensure their affairs are in order. There are all sorts of circumstances that could necessitate additional documentation and planning. For example, if you have a business, adult children from a previous marriage, a potential liability against your estate and/or a special needs child, you’ll definitely need to review those situations with an attorney. You’ll also want to address estate taxes in your particular state as well as at the federal level.

Note that assets held jointly and assets that have a beneficiary aren’t included in the will. Each state has its own rules about where the property goes without a will. In New York State for example, the property will go to your spouse and children. If you have no living relatives, the state will take your assets.

Digital Assets and Estate Planning

An increasingly important part of any estate plan is how to account for digital assets. With a multitude of usernames, passwords, websites and social media accounts, sorting through a deceased digital footprint can be aggravating and time-consuming for loved ones. You may decide to have a separate document with all digital asset information kept in a safe place with the will and power of attorney. You definitely don't want to put this information in your will, since the will can become a public document.

Revised UFADAA (Uniform Fiduciary Access to Digital Assets Act) 2015, which has been enacted in most states, allows estate fiduciaries to manage digital assets, including web domains, computer files, and digital currencies. However, the law does restrict a fiduciary's assess to electronic communications like email, social media accounts, and text messages.

Many sites now have online tools that allow you to decide what happens with your account after death. With Google's Inactive Account Manager, your account can be deleted entirely after death or the data can be shared with a trusted family member or friend. Facebook's Legacy Contacts allows you to decide if you want your page memorialized or deleted, or if you want a "Legacy Contact" to download your data after you pass away. When a deceased individual has conflicting instructions in a will versus the terms of service for the website or other documented areas, the order of precedence under Revised UFADAA is:

  1. The website's online tool
  2. The estate documents
  3. The terms of service

Estate planning is an ongoing process. Once your documents are completed, it’s best to keep the documents in a safe place and tell your family members and advisors where they are. Revisit your estate plan at least every five years or if you’ve had any major life changes. The death of a loved one is a stressful, tumultuous time, so having your affairs in order ahead of time can help prevent making things even worse.

Recent articles by David Flores Wilson: How You Withdraw Your Retirement Assets Matters


Disclosure: The information provided through this communication is intended solely for the general knowledge of visitors and does not constitute an offer or a solicitation of an offer for the purchase or sale of any security, and is not legal or tax advice in any way.