Everyone who is eighteen or older should have at least a simple estate plan. The term “estate” brings to mind images of mansions with guest quarters, but we all have an estate, and it is the assets that make up our lives: car, home, bank accounts, debts, and even digital assets like email and social media accounts, and even online photo and music collections. Determining what happens to, and who takes care of, these things if we pass or become incapacitated, is the essence of an estate plan.
A basic estate plan comprises a Last Will and Testament, Financial Powers of Attorney, Medical Powers of Attorney, Appointment of Healthcare Representative, and Living Will. Some basic plans will also include a Revocable Living Trust.
A Last Will and Testament, or Will, in its most basic form, controls the disposition of our assets upon our passing. It allows control over “who gets what” and selects the person or persons who should be in charge of that distribution, rather than the default methods provided in Indiana law. Other elements to consider include naming a Guardian for minor children, rather than leaving it to a probate court to decide. Upon consultation, it may also be advisable to include the creation of testamentary trusts, which provide mechanisms to manage assets left to minor or disabled children, or even an ailing spouse. Caretakers for pets can even be selected in a Will. Any Will should also be written with careful consideration of beneficiary designations on life insurance and retirement accounts.
Powers of Attorney (“POAs”) are documents that grant certain authorities or powers to another person to handle your affairs. A POA answers the question “If I’m incapacitated, who will pay my bills?” Effective POAs help to avoid the delay and expense involved in guardianship proceedings.
Medical Powers of Attorney and Healthcare Representative Appointments grant similar decision making authorities to another person to handle your medical affairs. A Medical POA answers the question “If I’m incapacitated, who will talk to the doctors to make my healthcare decisions?” Effective Medical POAs also help to avoid the delay and expense involved in guardianship proceedings, but also allow your representative to provide for your comfort and spiritual needs.
A Revocable Living Trust, which should work hand in hand with a Will, is a useful tool for planners who value the privacy and efficiency of avoiding probate (which is the public court administration of an estate, requiring the accounting of the distribution of all of a person’s assets), some degree of asset protection, and a level of control over the use of an inheritance (allowing an 18 year old grandchild to fund an education, but not buy a Maserati, for instance).
As we age and our lives change with marriages, children (or grandchildren), homes, retirement plans, or starting businesses, or as we accumulate more assets into our estate, our estate plans can and should change along with us. Because of this, it’s good practice to at least review these documents every few years to see if any adjustments should be made.
Some particularly important times to consider are:
- the birth of children or grandchildren
- marriage or second marriage
- change of jobs or change of career
- retirement, or approaching retirement
- the passing of a parent, or any relative leaving you an inheritance (whatever size)
- the disability of a child or other family member
Estate planning is all about making preparations or plans. These plans should not only include the efficient transfer of assets upon passing, but also plans for our own care. No estate plan is really complete without documents directing our care – powers of attorney and healthcare advance directives – and considering long term care plans, such as long term care insurance and other financial tools such as annuities, or medicaid eligibility planning.
Why is long term care planning important? Our society is increasingly moving toward aging in place, which is the understandable desire to live out our lives in our own homes. But often, due to conditions such as a disabling illness or injury, or a progressive disease such as Alzheimer’s or Parkinson’s, staying at home or staying at home without assistance is not possible or safe. The rising cost of long term care – commonly exceeding $7,000 per month for skilled nursing – is generally not covered by insurance or Medicare. Proper planning ensures that this situation will not leave our spouse or partner destitute, or allow us to pass that legacy gift on to our heirs.