What is Estate Planning?
More than the drafting of a will, today's
estate planning process can involve not only the distribution of your
property after death, but also financial, tax, medical and
business-succession planning.
You may have wondered what is involved in
estate planning and whether you need an estate plan. Estate Planning is
a process that involves your family, your CPA, and your attorney.
During this process, you can plan for the future in various areas.
We'll go over the process and what questions it might involve, and then
we'll look at some of the documents used in estate planning.
What Estate Planning can Cover
The process of estate planning can address the following
questions:
- Who will receive my assets after my death?
- How will they be distributed?
- Who will be my children's guardian after my death
and the death of my spouse?
- How will my bodily remains be disposed of?
- What are my desires regarding life-sustaining
medical treatment?
- If I become too ill or otherwise unable to manage
my own affairs, who will take care of things?
- If the person I love/live with is not my spouse,
how can s/he be permitted to make medical decisions for me, instead of
my family?
- Who will run my business after I retire?
- How can the transfer of my business to successors
be accomplished smoothly and cost effectively?
- If I or my spouse needs nursing home care in the
future, how can our assets be preserved?
While it may be difficult to approach these
questions, dealing with them now can help you to avoid problems later.
Estate Planning Terms
In addition to a will, trusts
are often used to accomplish estate planning objectives. Briefly, a
will states your intentions regarding to whom and how your
assets will be given away, and who will be guardian of your children,
after your death. On the other hand, when you put property into a
trust , you enter into an agreement with the trustee. The
trustee holds the property for the stated length of time and under the
stated conditions, for the benefit of the beneficiaries - those whom
you wish to get the trust's income of principal. The trust allows you
to give away income or property, and to place restrictions on the time
or manner in which the donee (recipient) will receive the property.
Trusts are also important in planning for estate and income tax
savings.
Medical treatment decisions
are normally made and communicated by a patient. However, when the
patient is unable to speak for her/himself, next-of-kin are consulted
by medical professionals in arriving at treatment decisions. Problems
arise, and decision-making is complicated, when the patient is
undergoing aggressive life-sustaining treatment with little or no
chance of returning to consciousness or recovery. In that case, the
"life-sustaining" treatment merely serves to extend and delay the death
process. When a patient's personal preferences are known, these can be
followed in making choices of treatment or decision to refuse or
terminate treatment.
The best way to express personal
preferences is in a Living Will or Advance Health Care/Medical
Directive. This document lists different kinds of treatments, shows
the preference of the person, and may also appoint someone (a proxy or
surrogate who may speak for the person if s/he is incapacitated from
making and communicating those decisions. This is especially important
in non-marital relationships, where the law does not provide decision-
making authority to the partner of the patient.
In planning ahead for clients
concerned with the ongoing administration of their financial affairs in
case they are [even only temporarily] incapacitated, a Durable
Power of Attorney provides a means of appointing someone who
can act during the period of incapacity. Having a Durable Power of
Attorney can also avoid the expense, inconvenience, embarrassment and
humiliation involved in the legal procedures to appoint a guardian for
an adult, which involves going through an incompetency adjudication.
The drafting of the estate planning
documents is done by the attorney. The CPA, who is familiar with the
client's assets, performs the analysis, calculations, and
data-gathering necessary to put the client's estate planning goals into
action, and makes suggestions for the saving of estate and income
taxes.
Conclusion
Just about everyone needs an estate plan -- it's not
only for the rich. The size and complexity of a client's estate
determine the level of sophistication needed for the estate plan.
Clients who deal with the difficult questions involved in estate
planning in advance have a better chance of avoiding unnecessary future
problems and costs.