What are the Basics of a Successful Estate Plan?

POSTED ON: August 18, 2021

An estate plan tells your heirs and the courts how to divide up your assets, but it also helps protect your loved ones from unnecessary hassle and expense–as well as potentially months, even years, tied up in the court system settling your estate.

What are the Basics of a Successful Estate Plan?

Whether you have a whole lot of money or a little, an estate plan is an essential. It protects you and your loved ones, and can also minimize taxes, expenses, fees and the loss of your privacy. A solid estate plan is created by an experienced estate planning attorney who is familiar with the laws of your state, reports the recent article titled “Estate planning checklist: 3 key steps to making a successful plan” from Bankrate.com.

All good estate plans have at least three key elements: a will, power of attorney and medical power of attorney (sometimes including an advance healthcare directive). Each serves a different purpose. Some estate plans also include asset protection trusts, long term care qualification trusts, income tax planning trusts, and estate tax planning trusts, but every situation is different. Your estate planning attorney will be able to create the right estate plan for you.  Also pick an tax attorney if you think you may need to legally avoid income or estate taxes.

A Will. The will, also known as the last will and testament, is the foundation of all estate plans. It directs your assets to be distributed as you wish. Without an estate plan, the court decides who will receive your assets. That’s the biggest mistake you can make. It’s called dying intestate. Your heirs will be burdened with additional court costs, delays and the stress of not knowing what you might have wanted.

However, financial accounts and property aren’t the only valuable thing protected by your will. If you have a minor child or children, the will is used to name a guardian (called a “tutor” under Louisiana law) who will take care of them. The tutor may also be the same person to manage the child’s financial assets, until they are of legal age. The tutor may handle both responsibilities (caring for your child and managing the child’s assets) which might not be the best option.  Only a will can specify your wishes. Failure to do so means the court will make your decisions for you.

A will can also specify that your estate (if you don’t have a probate avoidance trust) is administered pursuant to “independent administration”, which can significantly simplify the probate process in many cases.

Power of Attorney/Mandate. One of the other basics of an estate plan is a power of attorney, or POA (in Louisiana, called a “Mandate”), is used to give another person legal authority to take care of financial and legal matters, while you are still living. If you are incapacitated, a POA gives someone else the ability to pay bills and manage your affairs. A medical POA gives another person the ability to make healthcare decisions on your behalf. The POA is completely customizable: you can use it to give someone else broad powers to do everything, or narrow powers so they are in charge of only one bank account, for instance. It is very important to have a detailed discussion with the person before you name them. It’s a big responsibility and you want to be certain they are comfortable carrying out all of the tasks.

Medical Power of Attorney and Advance Healthcare Directive (or “Living Will”). A Medical Power of Attorney is similar to a general power of attorney, but it is used only for medical decisionmaking.  In otherwords, this document specifies who is able to make medical decisions on your behalf if you are not able to make them.  The Medical Power of Attorney generally also allows your agent (powerholder) to decide to terminate life sustaining measures on your behalf.  The Advance Healthcare Directive can be part of your Medical Power of Attorney or it can be a separate document.  This document lays out in detail what you want to happen to you if you are not able to make decisions because of severe illness or injury. If you don’t want to be resuscitated after a heart attack, for instance, you would state that in your advance care directive. It includes a list of treatments you do and do not want. Your family will be able to use it as a guide to help them make difficult decisions regarding sustaining your life, managing pain and providing end-of-life care.

Trusts in Estate Planning. The three elements above form the base of an estate plan, but there are other tools used to achieve your goals. Depending on your circumstances, you will want to incorporate trusts, useful tools for transferring assets of all types. For example, when assets are placed in an irrevocable trust, they are no longer part of your estate.  They can minimize your estate tax liability. Trusts are also used when parents wish to exert control over how and when money is distributed to children. If the parents should both die, a trust can prevent an entire inheritance coming into the hands of an 18-year-old who is legally old enough to inherit property, but likely not ready for the responsibility.

Trusts also transfer assets outside of the probate process, so they protect the family’s privacy. No one outside of the trustees know how much money is in the trust and how the money is being distributed. Trusts are not just for the very wealthy. They can help you protect assets from creditors, ex-spouses and litigious family members.

Read these other articles on estate planning: How to Simplify Estate Planning and Is Probate Necessary when Someone Dies? and What Is Elder Law? It Includes Many Areas and Can Your Pandemic Pet Be in Your Estate Plan?

If you would like to discuss these basics of a successful estate plan, BOOK A CALL with Ted Vicknair today.

Reference: Bankrate.com (July 23, 2021) “Estate planning checklist: 3 key steps to making a successful plan”

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