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Estate Planning - Understanding the Basics

Most people would agree that having an estate plan is important, but have the misconception that it sounds about as fun as having a root canal. This misconception leaves people with the feeling to procrastinate in creating an estate plan until it is necessary, or worse, until it is too late.



A Basic Estate Plan


Regardless of an individual's financial position, it is important for everyone to have an estate plan! Estate planning is more than focusing on the distribution of an individual's assets when he or she passes away. By having a will, powers of attorney, medical directives, and other documents, it gives you and your family peace of mind to know that you, your spouse, your family, and your wishes are protected in the event of a crisis. As you read along, here are some important documents to consider when you are developing an estate plan.


LAST WILL AND TESTAMENT: If anyone has experienced the loss of a loved one, they have probably heard of the term "will." You might have overheard someone say, "Do you know if Aunt Patsy died with a will?  A will is a legal document signed in a manner prescribed by law, which disposes of property upon death. The key word being "death." A will does not become effective or binding until an individual has passed away. This allows anyone to change or rewrite a will, as many times as they wish, as long as that individual is alive or not considered to be incapacitated. In the event that a loved one has passed with a properly executed will, the next step is to have the will admitted into probate. Court approval of the will through the probate process is necessary before the individual's assets can be distributed. If you thought that you had free rein to take your uncle Charlie's 1966 Shelby Cobra because he wrote it in his will, then you need to think again. All wills must be admitted into probate court (in some instances by an attorney) before a judge to determine that the will is a valid will and complies with the legal requirements of a will. Depending on which state the decedent resided in, will control the timing of the probate process. It may be awhile until you get to have that first "joy ride" because you'll be hit with court proceedings and attorney fees.


DISPOSITION OF REMAINS: This raises the question: buried or cremated? With this written document, it provides your final wishes of the disposal of your remains. Most people will consider if they want to be buried or cremated, and if they want a religious or non-religious service. However, you can be as creative as you want, as long as it is legal. Ever say, "I want to be buried in my car"? One woman in San Antonio did just that when she stated that she wished to be buried in her blue Ferrari "with the seat slanted comfortably." Her burial site at Alamo Masonic Cemetery has become a huge tourist attraction that has been visited by thousands of tourists over the years. Now while you are thinking of the ways you'd like to dispose of your remains, remember what Walt Disney has said, "if you can dream it, you can do it," and we like to add, as long as it's legal.


What's Next?


The first two legal documents we have discussed contain your wishes once you have passed. The next five documents will discuss what you would like to happen if you are still alive, but you are considered unavailable or incapacitated. What is incapacitated? It is when a person is temporarily or permanently impaired by mental and/or a physically deficiency, disability or illness to the extent he or she lacks sufficient understanding to make rational decisions or engage in responsible acts.  For example, if you have a loved one that suffers from dementia or Alzheimer's disease, then it is likely that person is incapacitated in the eyes of the law. In most instances, incapacity will be determined by a physician after conducting an assessment of the individual.


If you know someone who is at the early stages of dementia or Alzheimer's disease, then we advise our clients to (at the very least) execute the next five documents before he or she is determined to be fully incapacitated. It is illegal for someone to execute any legal document if they are determined incapacitated. If you would like to schedule an initial consultation before it's too late, contact us to schedule an appointment.


DECLARATION OF GUARDIANSHIP (for client and/or minor children): If you have minor children (under the age of 18), have you thought about which relative or friend you would want to take care of them in the event that you are incapacitated or have passed away? This is probably the hardest thing for a parent to think about, and a question we see our clients' ponder over the most. As a parent, you would want your children to continue to have a relatively similar lifestyle even after you are gone. However, what if your closest family member is out of state? Would you want your children to move to an unfamiliar and far away location to live with that family member? If they lived with the person of your choosing, will your children continue to have the love and respect that you've provided for them? These are some of the questions and/or concerns our clients' consider as we move forward through their estate planning process. Now, what happens if you don't have this legal document and you are incapacitated or dead? The court will decide on a guardian in the "best interest" of the child. Don't leave your children's life to chance. Speak with an attorney to begin your estate plan.


As you can see, an appointed guardian it not only for minor children, it's for adults who are incapacitated and can no longer care for their overall physical health, as well as their financial affairs. There are two types of guardians: Guardian of Your Estate and Guardian of Your Person.


Guardian of Your Estate: The guardian of your estate is authorized to manage all of your assets in your estate. This includes: the possession and management of your property, as well as enforce any obligation in favor of you and bring and defend lawsuits by or against you.



Guardian of Your Person: The guardian of your person is someone you choose to handle your personal care. This person has the duty to provide care (food, clothing & shelter), supervision, and protection for you.


Durable Power of Attorney: This is a legal document that grants an agent of your choice the authority to pay bills, manage bank accounts, make sound investment decisions, file tax returns, handle all real estate affairs, and other financial matters in the document. There are two types of Durable Power of Attorney: "Springing" and "Immediate."


Springing: This type of Durable Power of Attorney "springs" into effect once a condition has been met (i.e. if someone is incapacitated).


Immediate: This type of Durable Power of Attorney grants an agent "immediate" power once the document has been signed and notarized. This can be temporary with an expiration date if someone was unavailable for a period of time, and needed a representative to manage ones financial and/or real estate affairs during that time. For example, if one's spouse were to be out of town during a closing on a home, then the other spouse will be able to sign on their behalf.


Medical Power of Attorney: This is a legal document that gives an agent of your choice the ability to make health care decisions for you if you are unconscious or incapacitated. It is important for you to decide whom you want to represent to make medical decisions on your behalf. This person will be responsible in deciding in your best interest if life sustaining measures or not should be supported, along with your personal and religious values having an impact on other treatments.


HIPPA Authorization: Due to Federal and state laws, doctors and hospitals are restricted from discussing a patient with others without the patients consent. The HIPAA authorization identifies those people who can receive medical information about the patient during an event of crisis. With this legal document, it gives your doctor permission to disclose all medical information to your designated agent(s). This document goes hand-in-hand with the Medical Power of Attorney because it would be difficult for someone to make a medical decision without knowing all the information. Along with the Medical Power of Attorney, we include the HIPPA Authorization in all of our clients' estate plans.


Advance Health Care Directives: This legal document will instruct your family and doctors of your wishes regarding life support or life ending decisions. If you wish, you may request life-sustaining measures up to a certain period of time (i.e. six months) in the event of a possibility in change of your current medical condition before, as one would say it, "pull the plug." Alternatively, this document allows you to choose not to be kept alive on a feeding tube and that you wish to be permitted to pass away comfortably as possible. Importantly, when someone executes this document, it does not forfeit ones ability to accept Hospice care if one chooses.


Trust-Based Planning


The next document is called a "Living Trust." What is a Living Trust? It is a private agreement between a Grantor and a Trustee, for the benefit of a beneficiary. Since it is privately administered, all assets that are put into the trust do not need to be admitted into probate. A living trust can come in "different flavors" depending on your estate planning goals, but the primary kind of trust is called a Revocable Living Trust.


Revocable Living Trust: A revocable living trust has three parties involved: a Grantor, a Trustee, and a Beneficiary. A "trust" is created by the Grantor (You).  The Trustee manages the assets transferred into the trust (this can be you, an attorney, financial advisor, friend, or family member).  The Beneficiary can be one or multiple people who benefit from the assets transferred into the trust. After you have created the trust, you will become the Grantor, the Trustee, and the Beneficiary of your revocable living trust until you become incapacitated or die. Upon your incapacity, your designated Successor Trustee will step in to manage the trust assets the way you intend after you are legally unable to make financial decisions. While you are alive, you can make changes (amendments or restatements) to your living trust. Once you have passed, your revocable living trust becomes "irrevocable." Depending on your situation and your estate planning goals, an irrevocable living trust (especially in protecting assets in the event of prolonged medical care or nursing home expenses) can be more beneficial than having a revocable living trust. You can speak with an attorney about which trust is right for you.


As I've mentioned before, there are a variety of trusts that come in "different flavors." Often, the variety of trusts can be confusing, so we educate our clients regarding the different types of trusts and which are the best suited for them to achieve their estate planning goals cost effectively. Examples of those trusts include:


            -Special Needs Planning Trusts

            -Pet Trusts

            -Gun Trusts

            -Standalone Retirement Trust

            -Testamentary Trust

            -Irrevocable Life Insurance Trust

            -Domestic Asset Protection and Wealth Preservation Trusts

            -Intentionally Defective Grantor Trust

            -Charitable Lead and Remainder Trusts

-Health and Education Exclusion Trusts

-Beneficiary Defective Inheritors Trusts

-Grantor Retained Annuity Trusts



Schedule an Initial Consultation with Kiefaber & Oliva LLP


Here at Kiefaber & Oliva LLP, our main goal is to educate the community about the importance of estate planning, explain how each document works, and how to develop an estate plan that will meet our clients' estate planning goals.

Whether you are starting your estate plan for the first time or need updating, we can make sure you have the proper estate planning documents that will protect you, your family, and your legacy. Contact us today to schedule your initial consultation! (713) 229-0360.


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