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What is estate planning?


Thursday, April 13, 2017 7:15AM

What is estate planning, after all? I’ve always felt the phrase “estate planning” was an unfortunate choice of words. It gives the impression that it might be solely for people with vast Trump-like wealth or huge real estate holdings that stretch as far as the eye can see.

That’s not the case at all. It really just means the process of deciding who will be in charge of your affairs if you can’t handle them yourself during life, and who will receive whatever assets you do have once you’re no longer around.

So let’s say you’re still alive but unable to fend for yourself due to infirmity of some kind. Part of estate planning is making provision for one or more trusted friends, family members or others to handle your legal and financial business for you, and to make health care decisions for you that you can’t make yourself. The former document is called a “durable power of attorney” (durable, because it remains in effect when you’re incapacitated), and the latter is usually referred to as a “health care directive” (because it directs your agent about how to make medical and health care decisions for you if you can’t make them yourself). Pretty straightforward so far, right, and pretty essential no matter what you’ve got for assets.

Then there’s the matter of who receives your assets (meager or extensive) once you’re gone. That’s the function of a will, and it’s important to have one because if you don’t, whatever you have may go to people you might not have chosen at all - and leave others out entirely. I mean, let’s say you’ve got a classic car you want to go to a certain son, or a ring you want your granddaughter to have. Those items may not end up there if you don’t spell it out in a will. Plus, a will lets you decide who will be in charge of winding up your affairs, rather than allowing for conflict among competing relatives, as unlikely as that may be. That’s a little estate planning humor.

One other estate planning tool you might want to consider is a “revocable trust.” You’ve probably heard of those, but may have figured they’re only for those people with oodles of assets. Not true again. They’re particularly helpful for people with young families whose offspring might need guidance with what you leave them until they get beyond their judgment-impaired teens, or for people who don’t want their homes or bank accounts hung up in “probate” for many months. Probate is another of those mysterious concepts that confuse people. It just means the court-supervised process of transferring your assets from your name to the names of whoever you want to receive them. Lawyers love probate because it’s a process most people can’t handle themselves, and they - the lawyers - usually get paid a lot to navigate it. On the other hand, I’ve never heard a client say, “Oh, goodie, I can hardly wait to get my family into probate!”

Trusts are called “revocable” because you can change them whenever you want, and you can be in charge as your own “trustee” as long as you’re able. There’s no minimum amount you need to have a trust, and you don’t need to pay a bank or trust company to get involved if your situation doesn’t warrant it. You can also customize the arrangements for just about any situation - such as, who you want to take over as trustee when you’re gone; and at what age (beyond the teens!) or under what circumstances (for education expenses?) your children or others will receive the fruit of your life’s hard work.

And if you transfer your assets into the name of the trust before you die, then there’s no need for that pesky probate process either.

That’s about the size of most estate planning. It can be as simple as you want or as complicated as you need. The consequences of doing nothing, though, are nearly always more expensive, uncertain and time-consuming than the process itself. Still, even Abraham Lincoln and Michael Jackson never got around to it, but then both probably thought they had more time. Who ever knows about that, which is why sooner is always better than later.

L. Phillips Runyon is an attorney who works in Peterborough. He recently retired from his position as judge of the 8th Circuit Court, but is still practicing law.