How-and Why-to Start Estate Planning Now

The COVID-19 pandemic has highlighted end-of-life issues for all of us. One psychologist puts it this way: “[T]he reality of our mortality has pierced the consciousness of our society.” 

This reality has always been particularly present in the health care profession, of course, but it is becoming more clear in other fields as well. In my own law practice, numerous physician clients have asked me to prepare the estate planning documents which they had been putting off for years. 

This is a reminder that regardless of where you are in the training process, now is the perfect time to think about estate planning. With my clients, I typically start by discussing eight initial questions which might be a helpful starting point for you.

What is an estate plan, anyway?

At its simplest, an “estate” is a person’s assets – everything that he or she owns or has an interest in. An estate plan, therefore, considers what will happen to those assets upon death. 

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The most important document in an estate plan is a will, but I often advise clients to include other documents as well – trusts, durable financial powers of attorney, health care powers of attorney, and living wills.

Do I really need an estate plan?

Clients commonly ask me to help with their estate plans because they want to name a guardian for their young children. This is a great reason to start the estate planning process.

If you don’t have children, it might be tempting to think that an estate plan is not important – particularly if you are relatively young and healthy, and have few assets.

But regardless of your situation, you will have some assets which need to be distributed after death.  If you don’t have a will, those assets will be distributed according to your state’s “intestacy” laws – and these laws may not reflect your wishes. In Arkansas, for example, if you have been married more than three years and have no children, your spouse inherits everything. But if you have been married less than three years – your spouse inherits only half, while your parents (or their descendants) inherit the remaining half. An estate plan can make sure that your wishes are followed according to your state’s laws.

Additionally, assets are likely to surface after death – for example, there could be a security deposit from your apartment that must be returned. An estate plan makes the process of obtaining and distributing those funds much easier.

And contrary to popular belief, you probably can’t just tell someone who should receive your things. Some states may permit handwritten wills or oral wills under certain circumstances – but in almost all cases, a will should be written, signed, and witnessed (and perhaps notarized). If it does not comply with these formalities, a will is more likely to face a challenge or require court hearings to determine if it is valid.

Do I really need a lawyer to make an estate plan?

Maybe. It’s true that a number of online services advertise do-it-yourself wills. For some people, these may work, and it may be less expensive than retaining an attorney on your own.

The danger, however, is that these services may offer a one-size-fits-all approach that does not necessarily take into account your individual needs. They also prevent you from developing a relationship with an attorney who may be able to advise you on other matters – be it a review of your employment contract, a dispute with your remodeling contractor, or a building lease for your practice. You can also rely on a local attorney to make sure that your will complies with the requirements in your state. (Some states, for example, have temporarily changed their requirements due to COVID-19).

The best way to find an attorney is to ask for recommendations for people you trust – friends, family, coworkers, neighbors. And remember – just as with physicians, there are plenty of attorneys, so make sure to find one that you are comfortable with.

The cost of an estate plan depends on many factors – the lawyer’s expertise,  the market rate in your community, the complexity of your needs – which is why you can find cost estimates online from $100 to $2,500.   Some attorneys may charge a flat fee; others may charge an hourly rate. In any case, most attorneys will be able to give you an estimate after learning more about your needs. 

Some employers do offer access to prepaid legal benefits as an employee benefit, so make sure to check to see if you are eligible – this can help save money for simple legal needs.

What can I leave to someone in my Last Will and Testament? 

You are probably familiar with the key document in an estate plan, known as a “last will and testament”. But you might not know that a will only distributes the assets which are owned by you alone and which do not have a beneficiary. The distribution of these “probate” assets in your will is overseen by a probate court in your county to make sure that your wishes are carried out.

Assets that are held jointly or have a designated beneficiary are “non-probate” assets and are not governed by your will.  For example, if you have a joint bank account with your spouse or parent, the other account owner currently has rights to those funds – and simply continues to use the funds in that account after your death. A life insurance policy or retirement account typically has a named beneficiary who will receive the proceeds of that account. Upon your death, the proceeds will be transferred to the beneficiary on record. (Many accounts permit contingent beneficiaries, who are entitled to the proceeds if the initial – or primary – beneficiary has passed away.) I recommend my clients review both of these types of accounts as part of the estate planning process.

Do I need a Trust?

At its simplest, a trust enables a third party to hold and manage assets on behalf of a beneficiary. For example, for a family with young children, I often create a simple trust which is created if both parents pass away. The minor children are given the funds, but a trustee oversees those funds and uses them on behalf of the minor children.  When the children reach adulthood, the remaining funds are distributed to them.

Trusts can be created for a variety of reasons as part of your estate plan; often the more detailed instructions you want to leave, the more likely you are to need a trust. But trusts are not for everyone.  An attorney can help advise you as to whether it makes sense for you.

What is a Financial Power of Attorney?

A financial power of attorney gives someone else the authority to manage your affairs. These are frequently called “durable” powers because they are active at all times, whether or not you are incapacitated. For example, a financial power of attorney can allow a spouse to sell property or sign your name on a tax return if you are traveling overseas and unable to sign documents. 

What about Advanced Directives?

You may have come across situations in the hospital where families disagree about a course of treatment for a patient. How do you decide what to do?

Advanced directives can help make these situations easier. A health care power of attorney designates someone else to make health care decisions when you cannot (for example, consenting to surgery on your behalf.)  A living will details your wishes about specific types of treatment you consent to when you are unable to communicate yourself – typically, the withdrawal of artificial nutrition and hydration in end-of-life situations.

OK, you convinced me.  How do I start?

I advise my clients to begin by thinking about which trusted person will fulfill each of five important roles. 

  • First, who will be the “executor” of your estate? This person handles the details after you pass away – selling property, filing a tax return, paying bills.  Many of my clients choose to name their spouse as their initial executor. Note that some states require that the executor be a resident of the state in which you live.
  • Second, who will be the guardian of your minor children? This is the most personal decision as you determine whom you trust to raise your children according to your wishes.
  • Third, who will be the trustee of any trust created by or at the same time as your will? This person (or entity such as a bank) manages the funds in a trust on behalf of your beneficiaries – perhaps your children, or an aging parent.
  • Fourth, who are the beneficiaries? A beneficiary is someone who benefits under your will.  It could be a spouse, a friend, a relative, or a charity. Typically there are both “primary” and “contingent” beneficiaries.  In a common scenario, a spouse would be the primary beneficiary; if he or she has passed away, the children would be the contingent beneficiaries. 
  • Fifth, who will serve as your “attorney-in-fact” under a financial or health care power of attorney? This person steps into your shoes to make decisions and act on your behalf.

I encourage clients to have at least one alternate for each of these responsibilities. This allows someone to resign from the position if she is unable or unwilling to perform the duties (for example, if a grandmother’s health declines and she is no longer able to care for a three-year-old granddaughter.)

The other initial consideration I discuss with clients is whether they want to make any specific gifts. For example, you might want to give $1000 to each of your nieces, $5000 to the American Heart Association or your collection of vintage Star Wars figures to your brother.

Often the hardest part of completing an estate plan is just getting started.  It’s easy to put this off in favor of the day-to-day demands of work and life. And of course, none of us wants to think about the end of life.  

Dr. Jessica Zitter, a critical care physician puts it this way:  As the proverb goes, “The best time to plant a tree was 20 years ago. The second-best time is now.” The same goes for end-of-life plans: The best time to make them is now when you’re healthy and of sound mind.’

I’d encourage you to put estate planning on your to-do list before the end of 2021.

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