The Recipe For A Satisfying Estate Plan

When it comes to making an estate plan, there are many misinterpretations. The majority of people believe that estate planning is exclusively for those who are extraordinarily rich. However, that just simply is not the case.

Estate planning is the process of making decisions about what happens to you, your money, and your assets when you pass away or can no longer make decisions for yourself.  These are a few reasons why estate planning should be common practice for every adult who is over the age of 18. 

Do You Have the Right Ingredients? 

Developing an estate plan will usually involve more people than you may realize at first. The recipe for an effective estate plan must include the correct ingredients, or roles. Without the right people to fit the right roles, your estate plan could end up falling short of the planning goals you have set.

The following people listed are involved in the estate planning process have each have unique functions that are vital to establish as part of your plan:

1. Personal representative of a last will and testament
2. Trustee of a revocable living trust
3. Heirs or beneficiaries
4. Agent (financial and medical power of attorney)
5. Guardian for minor or dependent children

Personal Representative of a Last Will and Testament

A personal representative is someone who is responsible for settling your affairs, this includes: collecting and procuring your property and accounts, paying your collectors, filing and paying any necessary taxes, and appropriating any inheritance to your beneficiaries as said in the instructions memorialized in your will.

This vital role is sometimes characterized as an executor and may be a special administrator if the person happens to pass before making a will. When choosing a person for this role, it is critical to choose someone who you trust, someone who can take on this tedious process and someone who will be able to see it through until the administration of your estate and probate of your will is complete.

If you do not have a will, the court will assign an administrator for your estate according to the court’s procedure. Your property and accounts will be given to whomever state law determines to be the recipient. 

Trustee of a Revocable Living Trust

Another vital part of the estate planning recipe—explicitly related to making a trust—is the trustee. The trustee is the person or company responsible for handling the money and property that is in your trust. When you make a revocable living trust, you will usually serve as the first trustee but will appoint another person or company to serve as a backup (also known as a successor trustee). You should also name at least one other alternate trustee. The alternate trustees act as second or third choices if the original successor trustee chooses not to or cannot serve as the trustee after you.

Now usually, the trustee will carry out your wishes and instructions as they are outlined in the trust agreement, so this document outlines the scope of the trustee’s responsibilities. These responsibilities typically include: managing and investing trust property and accounts, paying bills, filing taxes, and distributing your possessions to whomever you have listed in your trust. It is important to pick someone who can take care of this responsibility.

Assume you own property or accounts that could be looked at as problematic, such as investments and intellectual property. In that case, it is important to pick either a sophisticated trustee or a person who is comfortable seeking the knowledge of someone who is a professional in that area. This is vital because the trustee has substantial legal responsibility and a higher standard of conduct, called a fiduciary duty. 

Heirs and Beneficiaries

Most people think heirs and beneficiaries are the same thing. However, this is not the case, even though they have very similar roles. Your heirs are family members who are entitled to receive a portion of your money or property after you die. In some cases, wives may not be considered heirs because they are joined to their spouses by marriage.

On the other side, a beneficiary is someone or an organization that you have identified in a will, trust, or other legal document to receive part of your property and money. Beneficiaries and heirs do not have any authority to you. The important thing to keep in mind is that when it comes to heirs and beneficiaries, you must find them and adequately identify them in the relevant legal document so everyone can receive what they were promised. 

Agent (Financial and Medical Power of Attorney)

An agent is a person to whom you give authority to act on your behalf if you are not able to do so. The most vital agents in estate planning are your financial agent and your medical agent, also referred to as proxies or representatives depending on the state you live in.

The financial power of attorney gives your agent the jurisdiction to manage your financial affairs when you are still living but not able to act. This may include paying your bills, filing your taxes, and managing your property.

The medical power of attorney allows your healthcare agent to make decisions on your behalf when you are unable to make decisions yourself, for example, when you are unconscious or under anesthesia.

Both the healthcare and financial agents are only able to act within the powers and within the scope that you have specified in the powers of attorney. When selecting an agent to fill these roles, remember they do not have to be the same person. Also make sure that the appointed individual(s) will do what YOU want and not what THEY want.

Finally, it is important to make sure to communicate your wishes to your agents to make sure that they perform things the way you want them to be done. 

Guardian for Minor or Dependent Children

The last vital ingredient that you need in your estate plan is to name someone who will care for your children or other dependents if you are unable to, either due to incapacity or by death. Depending on where you live, a guardian for your children can either be selected in your will or in a separate document called a nomination of guardian.

When selecting a guardian for your children or dependents, think of someone whom you trust and whose values closely resemble yours. Selecting a guardian can be a complicated task, but by not nominating someone yourself, it leaves the decision up to the court. 

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