There are many issues in life that fall within the general concept of estate planning. Primarily, the work addresses matters that happen following one’s death. The goal is to control the future when we are no longer here to make day-by-day decisions. With proper planning, death taxes (Estate Taxes and Inheritance Taxes) can be minimized or avoided. Continuity of a family business can be assured. In some cases, it is desirable for the process of probate to be avoided; in most cases, however, probate is nothing to be feared and is not at all costly. Often, it is desirable to change beneficiaries of life insurance, or to separate joint assets into separate ownership. Young children may need to be protected and provided for. While Wills and Trusts are the primary documents that are written to deal with post-mortem issues, there are also lifetime matters that fall within the general concept of estate planning. Gifts, Durable Powers of Attorney and Living Wills (more property called “Advance Directives for Health Care”) are also addressed in the context of estate planning.
To plan one’s estate means to develop a system by which we can control how a person’s property will be transferred and/or managed after death. Note that “property” does not mean simply real estate, but includes everything that a person may own. A client comes in to discuss his or her estate (typically, the first meeting takes at least 1 hour) and we discuss things in the following order: a) the client’s wishes (“testamentary goals”) about what should happen upon the client’s death. Who gets what? This is then followed by b) a general discussion identifying what assets the client owns, debts that encumber those assets, and a ballpark figure on the current value of the estate. Finally, c) knowing what there is and its worth, we evaluate the tax implications of the various ways to reach the testamentary goals with the assets at hand, to see whether there are savings (either in administrative costs or in death taxes) that are available. Often, a family with young children requires a Trust. A client’s spouse might require assistance in managing things, or might have special needs. There are mechanisms for “post-mortem” estate planning that we will discuss. I do not counsel on investments, but can refer you to investment advisors. The mechanisms that we use to plan an estate are
- Beneficiary designations
- Titled ownership.
- Lifetime giving
Durable Power of Attorney
A Durable Power of Attorney is a document by which my client appoints another person (called an “Attorney in Fact” or “Agent”) to deal with the property and business affairs of my client (called the “Principal”). A DPOA avoids the need for a Court to appoint a guardian if my client becomes disabled (mentally or physically) and cannot manage property or conduct business. This is an exceedingly important document and avoids a multitude of problems that can arise in its absence.
Advance Directive (“Living Will”)
In addition to making plans for death, ordinarily I will address whether a client wants to give instructions about desired medical treatment if he or she is unable to communicate medical decisions and is either imminently terminal or in a chronic vegetative state. This is done by way of an “Advance Directive for Health Care,” more commonly called a “Living Will.” This document can express the client’s wish to “pull the plug” or to receive every medical treatment available. It can be tailored to address differing religious beliefs and proscriptions.
There are two types of Trusts that you make during your lifetime: those that are revocable and those that are irrevocable. The revocable trusts can be established and changed at any time and from time to time, and their purpose is primarily to avoid probate. In New Jersey and Pennsylvania there is little to be gained by avoiding probate. There are privacy issues that one might want to consider; however, the common assumption that these arrangements will actually save money is generally not true. Nor do these trusts avoid taxes. Irrevocable Trusts can be extremely valuable planning tools (the most common is known as an “Irrevocable Life Insurance Trust.” The goal of an irrevocable trust is to reduce your estate by giving away some asset in a manner that can still benefit you or your loved ones; however, as with anything that you give away, once it’s gone, it’s gone. Well, perhaps not exactly.
Estate administration is the process by which a person’s property is transferred following death. If a person dies with a Will (such a person dies “Testate”) a “Probate” proceeding is initiated by which the Executor (a woman is referred to as an “Executrix”) is granted the authority to deal with the decedent’s property and carry out the instructions set forth in the Will. If a person dies without a Will (such a person dies “Intestate”), an “Administration” is initiated by which an Administrator (distaff, “Administratrix”) is granted the same authority, but rather than according to the instructions in a Will, in accordance with rules of “Intestate Succession.”
In either case, the tasks of the executor or administrator are the same: a) to inventory the Decedent’s assets and liabilities; b) to use those assets to pay taxes and enforceable debts; and c) to distribute the remaining assets according to the terms of the Will or according to the Intestate rules. Estate administration tends to be extremely detailed with many legal issues involved, and although some survivors try to do it themselves, an attorney should be consulted.
I represent Executors or Administrators to make sure that the duties and responsibilities are carried out in the proper manner – this is important because these representatives are considered “fiduciaries” and negligence or malfeasance on their part can result in punishment by the Courts. I also represent Beneficiaries (those named in a Will) or heirs (those who take under the rules of Intestate Succession) who either are aggrieved at the conduct of the fiduciary, or are worried that they will be ignored or mistreated. Nothing will show the fault-lines within a family more quickly or painfully than the death of a parent.