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FAQs: Beyond Money in Estate Planning

Isn't estate planning only about taxes?

This is a common misconception. Comprehensive estate planning takes the whole person into account. It involves selecting trusted individuals to carry out one's wishes and drafting documents that carefully guide and protect future generations. Estate planning also goes beyond taxes, wealth, and medical decision making: Many people choose to include things like recorded oral histories and precious heirlooms in their plans. This makes estate planning not just about property, but about the legacy, values, and vision you want to pass along to future generations.

 I thought trusts only dealt with property. How can a trust be used to pass along my values?

There is actually a huge diversity of types of trusts, and part of estate planning is picking the ones that work best for you, your family, and your goals. In terms of passing your values to the next generation, educational and incentive trusts can promote or discourage certain life choices. For example, someone who prizes their family vacation memories might create a fund for that purpose. Additionally, charitable trusts or foundations can pass along your personal mission of philanthropy.

What should I tell my children about my estate planning?

There is no cut-and-dry rule for what you should and shouldn't tell your children about your estate planning, but it's usually a good idea to err on the side of more information rather than less. It's a good idea to tell your children the reasons behind your decisions, so they understand how your values translate into your plan. Sharing your perspective far in advance using important documents like your health care directives can also reduce stress on your family in a difficult moment down the road. It is also an excellent way to reduce (or even eliminate) family infighting that sometimes occurs after death if your children have heard directly from you about the reasons for your decisions.

FAQs and Estate Planning Myths for Couples

Myth: Owning all of your assets jointly means that you do not need an estate plan because the survivor will automatically own everything as a matter of law.

Fact: While it is true that the survivor will automatically own 100% of jointly owned assets, this strategy does not protect the assets from creditors and provides no additional protection in case of incapacity. 

Myth: We have a prenup, so we do not need an estate plan.

Fact: While a prenuptial agreement may address the distribution of assets, it does not handle other important topics such as incapacity.  Without a Financial Power of Attorney or Medical Power of Attorney, if you are to become incapacitated, your family will need to petition the court to have someone appointed to act on your behalf for your financial matters and medical decisions. 

Frequently Asked Questions:

We just got married and don't have any children.  Why would we need an estate plan?

Just because you marry someone does not automatically mean that they will inherit from you.  Some assets, such as life insurance policies, have beneficiary designations that must be changed.  Whoever is listed on those will receive the assets on your death.  For those assets that do not have a beneficiary designation, they will be distributed according to the state law of intestacy.  While each state may vary, in most cases, the assets will be distributed between the surviving spouse and other family members. An estate plan puts you in control of the inheritance you leave behind.

We may be moving soon.  It's okay to wait until we're settled before having our estate planning done, right?

A move should not be a reason to put off your estate planning.  While we understand that there are a lot of changes occurring, tragedy can occur at any time.  Even if you are changing states, there are still some aspects such as updating your beneficiary designations that can be accomplished and will not be affected by the move.  Additionally, it is a good idea to have a Medical Power of Attorney, even if you are not going to be in the state for too much longer.  Life can be very unpredictable and you do not want to get caught needing court intervention should something happen to you or your spouse before the move.

FAQs - The Estate Planning Cast of Characters

What does a guardian do?

Guardians and conservators are court-appointed individuals who make decisions on a person's behalf in the event of mental or physical incapacity. These decisions can range from where you live to making sure that your bills get paid. These court-supervised helpers can be avoided by adding proper powers of attorney, and explicit directions for them, to your estate plan.

What's the difference between my health care agent and my financial agent?

While there is some overlap, health care and financial agents are two distinct roles in an estate plan. Your health care agent, also referred to as health care power of attorney or health care proxy, is responsible for making medical decisions on your behalf and may also implement your pre-arranged instructions if you experience incapacity. Likewise, a financial agent can manage your money by paying bills, filing taxes, purchasing insurance, and adjusting investments for you if you become unable to do so yourself. You may choose to appoint the same person or you may select different people. It's up to you to decide who is best for each role.

What does personal representative mean — is that different than an executor?

A personal representative is the same as an executor. This is the individual or institution named in a will who becomes responsible for carrying out the instructions provided in your will during the probate process.

Who should I pick as successor trustee?

For most trusts, you are going to be the initial trustee.  You will need to select a successor trustee to act when you no longer can. To figure out how to select the right person for the job, first consider whether the trustee should be an individual or a financial institution. If choosing an individual, pick someone you know who is diligent, detail-oriented, and whom you trust to carry out your clear instructions.

What does a successor trustee do?

A successor trustee (either an individual or institution) serves as a back-up, or replacement, to the original trustee (usually you) when the first trustee passes away or is incapable or unwilling to perform their duties regarding the management of your trust. As successor trustee, he or she will be in charge of managing the assets owned by the trust and ensuring that the assets are managed or distributed according to the terms of the trust.

Should I pick a corporate trustee?

While it's straightforward enough to pick a friend or family member you think will be up to the task, picking a corporate trustee is the best option for some people. Banks and trust companies that focus on trusteeship provide expert management. Being unrelated to your personal life, you can also rely on them to be impartial. However, corporate trustees do charge for their services and may have minimum asset requirements.  

What is a trust protector and do I need one?

A trust protector is an individual named in a trust to ensure that your estate planning goals and intent are carried out if the law or other circumstances change. A trust protector can be empowered to update your trust without court interference or mandate to carry out your wishes.  This is extremely helpful once you have passed away and cannot make the changes yourself. Although there is no legal requirement that you appoint one, a trust protector is often an excellent addition to an estate plan.

Who should be the trust protector?

This role can be carried out in a couple of different ways. You can appoint an individual that you trust to step in if the need arises. Because this is not a role that has ongoing responsibilities, there is not the same time commitment as that of a successor trustee.  You could also appoint an attorney or other professional to step in if necessary.

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