Estate Planning is terribly misunderstood. People tend to think it’s only for the really wealthy, the really old, or both. The truth is, Estate Planning is appropriate for all of us. The critical thing to remember about Estate Planning is that there is no "one size fits all" estate plan. Estate Planning is unique to each individual/family. It can provide sophisticated solutions for those with substantial means and complex needs. Just as important, it can provide basic assurances that we have named those we trust to make decisions for us when we may not be able to make decisions for ourselves.
But when should you do Estate Planning?
"When" depends on your particular circumstances. Have you recently gotten married, had a baby, purchased a house? Do you have stepchildren or a child with special needs? Have you been building and accumulating for many years and wanting now to lay out how those assets will be handled when you are gone? Are you getting older and having concerns about how you'll cover nursing home expenses if you should need them?
These are events we can plan for but an unanticipated tragedy could also strike any one of us, even early in life. It is not just our death that Estate Planning considers, planning also addresses the possibility of our incapacity. That’s why even a basic Estate Plan includes a Durable Power of Attorney for Property, a Health Care Power of Attorney, and a HIPAA Power. These powers are the tools we use to consider what would happen in the event of your incapacity and to appoint those you trust most to make sound decisions for you.
Let’s look at some examples of "when."
The Smith family has three generations. Elizabeth is a widow in her 80s, with one son, Chris. Elizabeth purchased an estate plan decades ago but she has not had her plan reviewed or updated since. Chris and his wife, Mary, are both in their 50s. They consulted an Estate Planning attorney and designed an estate plan when their first child, David, was born (20 years ago). While both plans are still valid, they could also each use an update.
Elizabeth’s life circumstances have changed dramatically over the years since she wrote her plan. Her child (Chris) is grown and married with children of his own. Elizabeth now wishes to include her three grandchildren in her plan. The friends she'd asked to be her successor trustees and agents under her powers of attorney have died, or become incapacitated. Elizabeth now wants Chris to step into those roles. Also, Elizabeth wants to learn more about how to plan for long-term care using Medicaid.
Chris and Mary have changed life circumstances, too. They have significantly more assets than when they were starting out...and David is no longer in diapers. They also have two additional children who are not named in their documents, Betty and Mike. Mike has special needs, for which he is receiving public benefits. This fact alone makes it very important for Chris and Mary to revisit their plan. Without updating their plan to address Mike's needs specifically, any assets Mike would inherit from his parents could cause his public benefits to be revoked.
While it is clear that both sets of the older Smith's need to revise their plans to address changed circumstances, David may also need some basic Estate Planning documents. David is in college living away from home. He also loves racing motorcycles. He is now an adult in the eyes of the state, with the responsibility to manage his own affairs. Imagine something serious were to happen to him, an illness or accident. As an adult, his parents would need his authorization to step in on his behalf. Securing a very basic plan that includes the powers of attorney for health care and financial matters and the HIPPA authorization should be one of David’s first steps into adulthood. In addition to protecting against the unthinkable, David’s plan could be designed to provide other benefits as well.
Estate Planning is appropriate for every one of us. As we can see with the Smith family, planning needs and considerations change over time and can be different for each stage of life. But the benefits a professional estate plan offers are wide-ranging, and they include your peace of mind.
Future articles in this series will address common questions about Estate Planning. Below are links to prior articles in this series.