Do You Need an Estate Plan or Will?
No one wants to squander a lifetime of sacrifice and hard work. However, if there is no estate plan, it’s entirely possible for this to occur. The aim of every estate plan, no matter how larger or small the estate, is to protect loved ones. What steps need to be taken are described in the article “Estate Planning for Everyone” from The Street. An estate plan can include almost any of your goals, and it’s not something to postpone.
Think of estate planning as a means of efficiently transferring the assets you’ve accumulated over a lifetime, while protecting your family from unnecessary expenses, stress and yes, taxes. Without an estate plan, the laws of Louisiana and the federal government will determine who receives what, and your estate may be reduced considerably by taxes. The process will take months, or even years. If you have ever been divorced, own property in more than one state, own a business or care for a family member with special needs, the complications and costs grow exponentially.
The core of any estate plan is the answer to a few simple questions: how do you want future generations to carry out your wishes? Who would you like to take care of? And how do you want to be remembered? An estate plan can allow you to set up a roadmap for future generations, manage how and when wealth is distributed, create a legacy for your family and, if you are charitably minded, for your community.
A Will, or Last Will and Testament. This document is used to spell out how your assets should be distributed upon your death. It also includes naming a tutor (guardian) if you have minor children and names an executor, the person who will be in charge of carrying out the directions in the will. You can also use a will to name gifts to individuals or institutions. Without a will, assets may be distributed in accordance with the laws of the State of Louisiana, which may not be the same as your wishes. Depending on the size of the estate, heirs may pay more in estate taxes and the family may find themselves battling over personal items.
The will forms the foundation of estate planning, but it is by no means the only document you’ll need.
Keep in mind, that if all you have is a Will, your estate will have to go through a process known as probate. Probate is the procedure supervised by the judicial district court of your parish to make sure your assets go the the rightful heirs. The process requires hiring an attorney to represent the estate before the judge, and generally costs thousands of dollars. In general, there are two possibilities to avoid probate. The first is a “living trust” created during life that you transfer all of your assets to in order to avoid the transfer of assets at death. A living trust, established in the correct way, can also protect assets after your death and even during your life if it is structured correctly by a good attorney. The second is an “Affidavit of Small Succession”. The Affidavit of Small Succession procedure is meant to help Louisiana residents avoid probate for small estates that generally can’t afford the cost of probate like larger estates can. There are limitations to the Affidavit of Small Succession procedure that you might want to read about here: Affidavit of Small Succession in Louisiana
Living Will. This is a legal document used to communicate end-of-life decisions in estate planning. It is also known as an Advance Healthcare Directive. It often includes a Do Not Resuscitate (DNR) order, if you do not want life-extending treatments, like a breathing or feeding tube, blood transfusion, dialysis, or pain medication. The living will only work if the family knows where it is and shares it with your healthcare providers. Let loved ones know your wishes and tell them where the living will is located.
In my estate planning practice, I generally eschew this document in favor of a broad Health Care Power of Attorney for two reasons. First, in my practice, I have never come across a doctor or hospital that would fight to “pull the plug” even if the family members of the patient didn’t want the plug to be pulled. If the family members, and in particular the agent listed in a Health Care Power of Attorney, want to keep their loved one on life support, the hospital will acquiesce to their wishes no matter what a Living Will might say. So a Living Will is, practically speaking, a document that formally lists the wishes of the patient, but from a pratical perspective, it can easily be overridden. Second, I as an attorney do not want to draft a legal document that, in effect, is making end of life decisions for my clients without the full story on those end of life issues. No document can predict the future when it comes to end of life issues and care. The law is a complex topic. Medicine is much more complex. A good and broad Health Care Power of Attorney will do the job that any Living Will can do, and it avoids the moral conundrums, as long as the person lised in the Health Care Power of Attorney knows what you want.
Power of Attorney—Healthcare and Financial. In estate planning, a Power of Attorney, or POA documents, name people to manage specific tasks for you if you are incapacitated, whether by illness or injury. The Health Care Power of Attorney is meant for medical decisionmaking, including giving authorization to a family member to “do not code” or refrain from the administration of “life support”. You should talk to the person named as your power of attorney and explain to him or her what “life support” means to you.
Don’t make the mistake of using a standard form because it may not reflect your wishes. For instance, you may want to name one person to handle your finances, but you may not want the same person to handle the sale of your home. The POA can be as broad or as narrow as you want, but only if it is created for your needs.
Without a POA, the family will need to go to court and have one or more people named to act as your curator (guardian). This takes time, is expensive, and extremely stressful. What if the court names a family member to make all of your decisions, and it is someone you don’t want? The matter will be out of your control.
Another word on Living Trusts. Living Trusts are used to avoid certain assets passing through probate, minimize taxes and maintain privacy. Living Trusts are legal entities, funded during life with a wide range of assets, which are transferred into the trust over which you still maintain control as the trustee. The person who receives the assets at the direction of the trust is known as the beneficiary. The beneficiary can be you and/or your heirs. There are numerous types of trusts, and your estate planning attorney will recommend the one that works best for your purposes.
To learn more about estate planning, read these blog posts: Is It Important to Have a Power of Attorney? and How Much can You Inherit and Not Pay Taxes? and Doctors Say Not to Take Low-Dose Aspirin and Will Gift to Heir Be a Benefit or Burden?
BOOK A CALL with me, Ted Vicknair, Board Certified Estate Planning and Administration Specialist, Board Certified Tax Law Specialist, and CPA to learn more about esate planning and asset protection.
Reference: The Street (Nov. 4, 2021) “Estate Planning for Everyone”
