“Estate planning is an important and everlasting gift you can give your family. And setting up a smooth inheritance isn’t as hard as you might think.” – Suze Orman
For more than 30 years it has been my privilege to help many of my fellow Wyomingites create and implement their estate plan. Having been a member of the Board of Directors and a Past President of the Southeast Wyoming Estate Planning Council, I have also had the wonderful opportunity to interact and work with some of Wyoming’s finest insurance agents, investment brokers, accountants, estate planning attorneys and corporate trust officers.
Most estate plans are founded upon four documents: 1. a durable power of attorney; 2. an advance health care directive; 3. a trust; and 4. a will.
A durable power of attorney allows you to designate an individual/corporate trustee (often referred to as “Agent”) to act in your behalf concerning your financial affairs. The term “durable” means that your appointed Agent may act in your behalf even if you have become incompetent or otherwise unable to act in your own behalf. You may choose to make your durable power attorney immediate (i.e. it takes effect at the time you sign it) or springing (i.e. it takes effect at the time you are determined to be incompetent). This legal document is a very practical and efficient estate planning tool.
For example, my mom’s durable power of attorney was extremely beneficial when she fell and broke her hip. I was able to effectively manage her investments and timely pay all of her bills while she recovered from her hip surgery.
The advance health care directive provides you with the ability to appoint someone to make specific health care/medical decisions in your behalf if you are unable to make such decisions for yourself. It also allows you to provide end-of-life direction to your physician(s) if you are diagnosed with a terminal condition.
The advance health care directive is often misunderstood because many mistakenly believe that, within this document, you appoint someone to make the end-of-life decisions for you. Under the advance health care directive it is you, not your designee that makes such decisions.
The vast majority of my clients prefer to utilize a trust as part of their estate plan. A trust is a legally recognized entity which may lawfully own and manage property. The trust is administered by a trustee for the benefit of the trust’s beneficiary or beneficiaries. My clients generally prefer to designate themselves as the initial trustee of their trusts. My clients decide what to name the trust (e.g. The Brown Family Revocable Trusted, Jim’s Revocable Trust, etc.).
A trust has many advantages over a will. Two very distinct advantages come to mind: 1. a trust avoids the expense and delay associated with a probate; 2. a trust can provide for your needs while you are alive, but disabled.
When I first began preparing trusts in the 1980’s, my primary focus was upon the notion of avoiding probate and prompt/seamless distribution of estates upon death. Now, my primary focus is upon the notion of the trust taking care of my client’s fiscal and physical needs during extended times of disability (e.g. long term dementia, Alzheimer’s, etc.) that often occurs before death. This means that the identity of the successor trustee (whether an individual or corporate trustee) is of paramount importance.
I routinely advise my clients, over and over again, that their trust (after being executed) must acquire ownership/title in and to their assets (e.g. title to real estate, brokerage accounts, savings accounts, etc.). Assets not owned by the trust upon my client’s death may be subject to probate.
I have a backup plan to address the times when my clients forget my admonition to transfer their assets into the name of their trust. I prepare a will, the type of which is often referred to as a “pour over” will. This form of will designates my client’s trust as the beneficiary of my client’s probate estate. This provides a safety net to make sure that all of my client’s assets are ultimately administered/transferred pursuant to the specific terms and conditions set forth within their trust.
If my clients have minor children (i.e. younger than 18-years-of-age), I also provide a section within their will that identifies who the guardian(s) of their children should be.
Please know that there is not going to be a test at the end of this column. My simple desire is that, after reading this column, you will have a better understanding of how of the estate planning process works.
Speaking from both the perspective of an experienced (i.e. old) attorney and a successor trustee/Agent, your preparation of an estate plan truly is an act of kindness which considerably benefits both yourself and your heirs.