Administering an estate after the death of a loved one is already a difficult task during the grieving period. Oftentimes, family members feel lost and confused. Even with the help of a qualified attorney, the process can be overwhelming. It is therefore helpful to organize one’s affairs ahead of time. Any notes left with the trustee, a loved one, or even a financial advisor or an attorney should include the location of important documents, a comprehensive inventory of assets and debts, including cash, investments, and real estate, as well as lists of professional and personal contacts.
The next crucial and main step involves getting the estate planning documents in order. A financial power of attorney allows a person to designate an agent who will make financial and legal decisions in case of the principal’s incapacity. A health power of attorney designates an agent who will make health care and personal care decisions on behalf of the incapacitated principal. A declaration regarding life sustaining treatment will address end-of-life decisions.
A revocable trust allows the grantor to retain complete control over the assets in trust during his or her lifetime, while also directing the distribution of the assets to the beneficiaries upon the grantor’s death. As a supplement to the trust, a pour-over will directs the distribution of assets accidently left out of one’s trust to the trust. Sometimes, a last will may be preferable to a trust as it typically carries a lower cost upfront. However, in jurisdictions with high probate costs, or when a person owns real estate, or wishes to manage the distribution of assets in a very specific way, a trust typically would be recommended.
A complete estate plan, in addition to containing the estate planning documents, should also address assets intentionally left out of trust. Oftentimes, life insurance policies, retirement plans, or annuities will remain out of trust with the beneficiaries directly named. The access to those assets can sometimes be quicker and easier if they are not a part of the trust. The plan for the intended distribution of those assets should be a part of the estate plan.
Lastly, while the estate planning documents will contain the instructions regarding the distribution of one’s estate, communicating with the loved ones and fiduciaries ahead of time and explaining the reasoning and plan for the distribution of assets and the intended legacy can be very beneficial and will allow for the clear distribution of the estate in accordance with one’s wishes.
Depending on the type and value of the estate, a comprehensive estate plan may require cooperation with one’s CPA, financial advisor, or tax professional.
There are multiple parts to a comprehensive estate plan and it is crucial to coordinate all aspects of it. Without a comprehensive estate plan, the loved ones and fiduciaries may face unnecessary difficulties and one’s assets may be distributed in an unexpected and unintended way.
