Painful Planning

It seems the last thing people want to do is plan for death. In addition to potential estate tax issues, especially in states that don’t follow the federal estate tax exemption, estate planning gives each individual the ability to say where and when his or her assets are to go. Estate tax planning can minimize if not eliminate estate taxes.

As a part of estate planning people with children below the age of majority can and should determine who will have custody of their child(ren) to raise them and support them if something happens to one or both parents.

In addition to wills, estate plans often use trusts both living trusts (inter vivos trusts)and trusts arising from wills (testamentary trusts).

Each type of trust has its own pros and cons. Living trusts allow assets to pass after the death of an individual without going through the probate function. However, the living trust can be expensive and the cost occurs at the setup not after death. Also, assets in an inter vivos living trust do not avoid estate taxes.

In addition to wills and or trusts that are set up, people should have both a living will (health care proxy) and a Durable Power of Attorney.

A living will (health care proxy) gives permission to another individual to make medical decisions in case you are unable. Included with a living will (health care proxy), I recommend that the individual include as part of the health care proxy or living will one’s wishes as to what to do under certain medical conditions. By providing an explanation of your desires in case of emergency, the designated individual is not making the decision, the designee is telling the doctors exactly what you want done.

This may also take away any potential guilt the designated individual might have if he or she has to decide your fate without any instructions.

Another important document to have is a Power of Attorney. A power of attorney gives the right of the individual appointed to act in place of the individual giving the powers. Unlike the living will, the power of attorney gives immediate rights to the named individual. The powers take effect immediately even though the individual may only wants you to have control if the grantor of the power is unable to perform his or her acts. One way to mitigate powers is to have a third party hold the power of attorney and give it to the grantee upon the grantors unability to conduct his or her business.

A Durable Power of Attorney is valid until the death of the individual and is in force while the individual is incapacitated where a power of attorney (not durable) is not effective if an individual is incapacitated.

For more information see the attached links:

What is estate planning?

Estate Planning Dictionary

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