August 2020

Time and time again, we hear about celebrities who pass without any estate plan in place and learn about how the mistakes they have made negatively impact their families.  Understandably, nobody wants to plan for their own death, as accepting one’s mortality is a tough pill to swallow.   As such, estate planning can be an unaddressed topic that lingers ominously in the background of our lives. However, the repercussions your family will face are serious if you delay preparing for the unforeseen curveballs that life throws our way - like a deadly pandemic that wasn’t on anybody’s radar a mere 12 months ago.

To ensure that your family is secure, no matter what occurs in the future, you must be proactive in addressing the most important elements of your estate plan.  In short, the best time to address your estate planning is today, so let’s review the key components of a well-rounded plan.

Will

A will is the most basic and essential tool that forms the foundation of any sized estate. If a will does not exist when someone dies, their estate becomes subject to probate proceedings, and the state court becomes the executor responsible for overseeing the settlement of your estate. The state’s Intestate laws will decide how your property is distributed, who gets paid first and can even establish guardianship for children. Without a will, it would be hard to imagine a situation in which the state would dispose of your estate in exact accordance with your wishes. To compound matters, the probate fees associated with the courts can take a chunk out of your estate.  After the delay and costs of an intestate probate, your family will endure far more grief and expenses than you may have intended. 

While there can be more to an estate plan than just a will, it is the presiding legal document that guides the process of settling your estate. A will can accomplish the following for you and your family:

• Specifies the disposition of your assets: Without a will, any asset that does not pass by a beneficiary designation (such as a retirement plan or insurance policy) or by a registration of Transfer on Death or certain Joint Ownership, will be disbursed by the state’s intestate laws, which may not align with your intentions. A will specifies your priorities and directs your assets where you want them.
• Names a guardian for your children: You know who the best guardian for your children would be, but unless a guardian is named in your will, the state will decide who takes care of your children.
• Names an executor: The executor plays the critical role of ensuring each provision of your will is followed, and your estate is settled per your wishes. While a spouse is commonly named as an executor, a contingent executor should also be named.
• Accounts for special circumstances: A will can also help account for different family circumstances, such as the combining of families due to remarriage or the unique needs of a specific child.

Once your will has been established, it is also important to recognize that things change – family status, assets, the legal and tax landscape, and even your wishes can evolve over time. If your will isn’t current, it may no longer serve your purposes, so wills should be reviewed after any significant life event or every few years. Lastly, it is also vitally important to seek the guidance of an estate attorney when making changes, as a small mistake could render your will invalid or have unintended consequences.

Power of Attorney

Your estate planning isn’t only about what happens after you die, but also if you are alive, incapacitated, and unable to make decisions on your own. Establishing your power of attorney provides explicit instructions to your family and the courts for the management of your legal and financial affairs while you are alive.

Appointing a power of attorney grants a trusted individual the right to make decisions on your behalf if you become mentally or physically incapacitated until your death. Without a power of attorney, your assets are essentially frozen. Family members will be unable to access your financial resources unless they apply to the court for the authority to act.

Living Will, Health Care Proxy

A living will (not to be confused with a will or a living trust because it has nothing to do with the settling of your estate) is a legal document that instructs medical practitioners of your acceptance or denial of life-sustaining medical intervention if you become incapacitated through a terminal illness. Also referred to as an advance medical directive, it takes medical decisions out of the hands of your doctors and your family.  Most states only recognize living wills as instruments to be applied after a terminal illness has been diagnosed. So, it would be essential to add a health care proxy to your will, which guides medical intervention in cases where you are incapacitated, but not terminally ill.

Living Trust

A living trust is a form of ownership that can hold a title to your assets. The primary purpose is to transfer assets directly to your beneficiaries outside of probate. A Living Trust is revocable, which means you can change it at any time, depending on your circumstances. After your death, the trust becomes irrevocable, and all its provisions must be carried out by a trustee who you have designated.  As compared to a will, which is a matter of public record, a living trust also keeps your financial affairs private, since what goes into your trust stays with your trust. While assets within a living trust are still includable in your estate for tax purposes, they will be immediately available for your family. The trust can also establish a timeline for the disposition of your assets. Most assets, such as your residence, investment accounts, real estate, or a business, that doesn’t already pass by beneficiary designation (i.e., life insurance, retirement plans) or is not titled under certain Joint ownership or as Transfer on Death, should be considered to be held in a Living Trust.

Love Letter or Open Upon Death Letter

While a will, power of attorney, living will, healthcare proxy, and living trusts are all legal documents, a Love Letter is an informal but sometimes vital instrument that informs your family of other relevant information that you would like to convey.  The letter can document your wishes surrounding topics like; the location of estate documents, people to contact, organ donation, funeral/burial/service instructions, obituary information, memorial gift requests, letters or messages to family members, special gifts, a list of online accounts and credentials or any instructions not included in your will. 

The Best Time for Estate Planning is Now

While we’ve discussed the basic components and framework for estate planning, additional advanced strategies and trusts, especially for larger and more complex estates, may be employed to further protect your assets and maximize wealth transfer.  In addition, there are unique strategies that are designed for the charitably-inclined, or to address nontraditional family circumstances and health-related issues.  Lastly, business owners should consider plans to ensure the proper transfer or disposal of their business interests.  

Nobody likes to ponder and plan for their future demise or incapacitation, but that doesn’t make it any less necessary.  It pays to address these difficult decisions while you are healthy and in a positive frame of mind.  Doing so will also buy you additional peace of mind.  If you have not established your estate plan, or recently reviewed an older plan already in place, there is no better time than the present.

 

Important Disclosure Information

This report is provided as information and commentary on various topics. The views expressed in this report are as of the date of the report, and are subject to change based on market and other conditions. This report contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.

Please note that nothing in this report post should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax or legal advice. If you would like investment, accounting, tax or legal advice, you should consult with your own financial advisors, accountants, or attorneys regarding your individual circumstances and needs. Advice may only be provided by AtwoB after entering into an investment advisory or financial planning agreement. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment and/or planning advice from AtwoB.  If you are an AtwoB client, please remember to contact AtwoB, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. 

Past performance is not a guarantee of future returns. Investing involves risk and possible loss of principal capital.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by AtwoB, or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Historical performance results for investment indices and/or categories have been provided for general comparison purposes only, and generally do not reflect the deduction of any fees or expenses, transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results.  It should not be assumed that your account holdings correspond directly to any comparative indices and/or categories

AtwoB is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice.  A copy of the AtwoB's current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request.