You’ve probably come across the terms estate plan, trust, will, or power of attorney at some point, but have you thought about how they might apply to you personally? This article will provide an overview of estate planning basics, as well as provide you with insight as to when you should consider engaging an attorney to help you formulate an estate plan. In addition, this article will touch on the probate process, and why so many individuals work avidly to avoid it.
What is an estate plan?
Everyone has an estate, consisting of all of their possessions, large or small. Estate planning, at its most basic level, is determining where and to whom those possessions will go to when you die. However, modern estate planning has expanded to cover much more than just the disposition of your belongings after your death. Today an estate plan might include: (1) instructions on how you and your belongings will be cared for if you become incapacitated, (2) name a guardian for any minor children you may have, (3) provide for family members with special needs without disrupting government benefits, (4) providing for a family member who needs protection from creditors or divorce, (5) provide for the transfer or management of a closely held business during incapacity, and (6) minimize taxes and court and attorney fees.
Who needs an estate plan?
You might think that estate planning is reserved only for high net worth individuals. However, this assumption overlooks the fact that estate plans are tailored to the individual and therefore can be as basic or as complex as needed. Everyone can benefit from an estate plan, even if that just means leaving everything to your immediate family and letting them know how you would like to be cared for in the event of incapacity. We can’t predict what our needs will be in the future, but with the help of an attorney you can create a plan to take care of you and your loved ones in the face of this uncertainty.
What happens if I don’t have a plan?
All states have default rules created in the event that a person doesn’t have an estate plan in place. But as I outline in more detail below, these default rules should be treated as a backup or fail safe, not your plan A. There are two main triggering events that you should be thinking about while planning for your future: 1) Incapacity and 2) death.
Incapacity occurs when, due to physical or mental inability, you are unable to care for yourself and your affairs. At this point in time, without powers of attorney in place, your loved one’s cannot act on your behalf to protect you.
In order to be able to get you the care you need and to manage your finances, your loved ones will have to petition the court to appoint a guardian or conservator. This process can be long and costly, and in the meantime your family will not be able to help manage your assets or help you access the care you need.
What changes with powers of attorney? To start, there are two main forms for powers of attorney. The first is a Durable Power of Attorney, which deals with your financial affairs. Its “durable” because it will either persist through or spring into action during a period of incapacity.
The second is a health care power of attorney, which deals with your healthcare needs and decision-making. In Oregon, the legislature has combined the Health Care Power of Attorney with a “living will,” (which directs your end-of-life decision-making) into one Advanced Directive form.
Having a powers of attorney in place will not only save your family the headache of petitioning the court for a conservatorship, it will also let your loved ones know who you choose to make decisions in your absence, and how you would like to be cared for.
Although it may feel a bit taboo to talk about your own mortality, the reality is we can’t know for certain when or how we will die. Without an estate plan, your assets will be distributed according to the probate laws of your state, which can lead to unwanted outcomes especially in the case of multiple marriages, or estranged family members. The probate process is a long and arduous process that can take months or even years before a final distribution of assets is available.
In addition, should both parents die in a mutual event (i.e. car accident), the court will appoint a guardian to care for your minor children without the benefit of knowing who you would have chosen. With an estate plan, you can choose who will raise and take care of your minor children in the event of such a tragedy.
When should I create or update my estate plan?
If you have not started an estate plan, the time is now. Estate planning should be thought of as a quasi-insurance policy. You don’t wait until your house catches on fire to buy homeowners insurance, so why wait when it comes to estate planning. Having a comprehensive plan in place will give you peace of mind that you and your loved ones will be protected against uncertainty.
Estate planning is a process rather than a one-time engagement. As your life and family grow and change, your estate plan should be changing with it. Below is a non-exhaustive list of some of the most common events that should trigger you to update your estate plan with your attorney:
- Birth of a child or grandchild
- Child or grandchild becoming an adult
- Death or change of circumstances of a guardian named for a minor child
- Illness or disability of your spouse
- Death or incapacity of a family member
- Large inheritance/ or increase/decrease in wealth
- Career change or change in career goals
- Change in insurance plans
- Purchase or sale of trust assets
- Start or loss of a business
- Change of life or long term care coverage
Have a life-change that wasn’t listed? Chances are, if something big happened in your life that’s making you question whether or not you should update your estate plan, it’s time to contact your attorney. If you have any questions or would like to speak with an attorney about your estate plan, please feel free to contact our office for further assistance.