Core Estate Planning

What is Core Estate Planning?

If you are reading this, chances are you have questions and concerns about what will happen after you die. Who will receive your assets? Who will take care of your minor children or disabled relatives? How fast can your family access assets to provide for their needs? Estate planning covers this and much more.

Yet, many people believe that estate planning is only for wealthy individuals and affluent families. This is a common misconception. The reality is that nearly everyone can benefit from an estate plan. A core estate plan typically consists of a HIPAA Authorization, Powers of Attorney for Health Care and Property, a Will, and often a Revocable Trust. For individuals with estate tax or business succession planning concerns, the core estate plan is the foundation upon which advanced planning is built.

Our clients often express surprise after our initial consultation (yes, it’s free) as to the number of issues they never even considered. An estate plan can be as simple or complex as the needs and wants of the individual. The best estate plans are those designed thoughtfully to meet the client’s specific objectives without unnecessary complexity. Our goal is to take what may seem like a daunting and confusing process and make it easy for our clients understand.

Common Core Estate Planning Objectives

While individual circumstances vary, there are many common core estate planning objectives that our clients typically share. These include:

Instructions for your care if you become mentally or physically disabled.
Avoiding the need (and expense) of a legal guardianship if you become legally incompetent.
Control over personal health care decisions involving treatments, organ donation, and end-of-life care.
Timely and organized distribution of your family heirlooms, jewelry, and other valuables.
Minimizing disputes and contention among family members at your death.
Naming a guardian for minor children and adult dependent children.
Providing resources for family members with special needs, without disrupting their continued eligibility for government benefits.
Providing for loved ones who might be inexperienced with money or who may need protection (now or in the future) from creditors or asset division in divorce.
Planning for the transfer of a business at death.
Minimizing taxes, court costs and unnecessary legal fees while maximizing your privacy.

Core Estate Planning Documents

An estate plan typically includes one or more of the following documents:

Will – A formal document that becomes operative at your death and controls (i) the disposition of assets to named beneficiaries; (ii) the nomination of guardians of minor children and adult dependent children; and, (iii) the selection of an executor to carry out your wishes.

Living Trust – A legal document that is effective during your lifetime and after your death that controls how trust assets are to be used during periods of your disability and after your passing. Generally speaking, assets held in a living trust can pass after your death to or for the benefit of your family outside of probate court involvement. Avoiding probate can save an estate thousands of dollars in legal fees and court costs and delays that often accompany the probate court process. In addition, assets passing to or for the benefit of a beneficiary through a living trust can be shielded from the beneficiary’s creditors. If the estate is large enough to incur estate tax liability, the use of a living trust can allow for the estate taxes to be deferred until the death of the surviving spouse. A trust-centered plan can be more expensive than a will-centered plan; but considering the numerous benefits, many of our clients consider it to be a bargain.

Power of Attorney for Property – A legal document where you, as the “principal,” name an “agent” to make and carry out financial decisions for you during your lifetime. While the Power of Attorney for Property is most often used if the principal is incapacitated, it can also be helpful if a principal is traveling or temporarily unavailable (for example, when recovering from surgery in a rehabilitation facility).

Power of Attorney for Health Care – A legal document where you, as the “principal,” name an “agent” who is authorized to make health care related decisions for you if you are unable to make such decisions on your own. Almost everyone over the age of 18 should have a Power of Attorney for Health Care, including young adults. Once a young adult reaches age 18, their parents do not have the legal right to access their medical records or make medical decisions for them.

HIPAA Authorization – A legal document that allows you to share protected medical information with family or friends. For example, a HIPAA Authorization can be used to allow your family to quickly inquire about your medical condition in an emergency situation.

An estate plan can also build on the core planning to include prenuptial agreements, buy/sell and shareholder agreements for business owners, and irrevocable trusts to hold life insurance, business interests, real estate, and other assets. Our estate planning attorneys will take time to understand your goals and unique situation before offering advice on how to structure your plan.

The Risk of Not Having an Estate Plan

Some individuals delay estate planning because they think that the size of their estate does not warrant an estate plan. Others believe that they are too young, too healthy or simply too busy to bother with an estate plan. Too often this means their family and friends have to pick up the pieces when something unexpected happens to them.

Your state of residence contains a series of “default rules” that will govern your assets and estate if you do not have a valid estate plan. These default rules may conflict with what you would have wanted. For example:

During your disability: If your name is on the title of your assets and you are unable to manage your affairs due to mental or physical incapacity, your family may need to petition a court to have a legal guardian named. As a result, a court (and not your family) will control how your assets are used to care for you and who will be named as your legal guardian. Guardianship proceedings can be very expensive and often create a ready forum for the public airing of family grievances and disagreements. In addition, a legal guardianship can be difficult and expensive to terminate, even if you recover. In many cases, however, the need for a legal guardianship can be minimized or removed through the use of Powers of Attorney and a living trust.

At your death: If you die without an estate plan, your assets will be distributed according to the probate laws in your state. In many states, including Illinois, if you are married and have children, your spouse and children will each receive a share. That means your spouse could receive only a fraction of your total estate, which may not be enough to live on. Assets passing to your legal heirs through intestacy will not be shielded from their creditors. In addition, if both parents die (for example, in a car accident), a court will appoint a legal guardian for your minor children—without taking into account your wishes. These risks (and others) can be avoided through the use of thoughtfully designed and drafted core estate planning documents.

Reviewing Your Core Estate Plan

If you already have an estate plan in place, we recommend that you review your estate planning documents from time to time to ensure that they continue to address your needs, circumstances and goals. Your estate plan should be an ongoing process and not a one-time event. For example, you may consider reviewing and possibly updating your existing estate planning documents when:

Having a new child or grandchild;
Getting married or divorced;
Changing jobs or retiring;
Selling a business;
Dealing with an illness, disability or death of a spouse;
Planning for the education or special needs of a child or grandchild;
Experiencing a substantial change in net worth;
Receiving an inheritance from a family member or friend;
Moving to another state;
Updating the list of individuals to serve as guardians, agents, executors and successor trustees in your existing documents; or
Learning of any federal and state tax law changes.