Basic Estate Planning
Regardless of your level of wealth, the failure to establish an estate plan can be detrimental to your family. A properly structured estate plan helps ensure that family and financial goals are addressed during life, after death, or if disabled. The following planning documents should be considered regardless of whether you are married or single, or with or without children.
Last Will and Testament. A will directs how your assets will be distributed at death. Without a will, property would pass as required under state intestacy statutes. State law may not provide the inheritance scheme you would choose for your family, and could also increase exposure to federal estate taxes. In addition to directing the disposition of property, a will can enable you to:
Name an executor, avoiding the trouble and cost of a court-appointed administrator.
Avoid bonding costs.
Avoid annual reporting/accounting to the probate court.
Name a guardian for minor children, substantially eliminating the likelihood of a court-appointed guardianship.
Protect the children’s inheritances in the event your surviving spouse should remarry.
Retain assets in trust if distributions to your heirs at your death would be inadvisable.
For high net worth married couples, a will, if structured properly, also can help assure federal estate tax benefits are preserved for the couple’s estates by making optimum use of the federal estate tax exemption ($5.34 million per individual in 2014 and $5.43 million in 2015, as indexed for inflation) of both spouses. For couples with more modest estates, estate tax-efficient wills may not be as advantageous from a total federal tax perspective as an “all-to-spouse” will, taking into consideration the unlimited marital deduction, the potential portability of a deceased spouse’s unused exemption amount, and the opportunity to have appreciated assets receive a step-up in tax basis at both spouses’ deaths (which could help reduce the heirs’ capital gains tax exposure).
Revocable Living Trust A revocable living trust (RLT) is an arrangement by which a person (the grantor) transfers ownership of property into a trust during one’s lifetime. An RLT can be used as a substitute for a will in many respects by providing for the distribution of assets upon the grantor's death. Unlike a will, a revocable living trust can be established to govern the distribution and use of the trust assets during the grantor’s lifetime, which can make it a useful planning tool in the event the grantor becomes incapacitated. In essence, the trust is like a rulebook (which can be modified or revoked by the grantor during lifetime) for how the grantor’s assets are to be handled while alive and after death. Establishing an RLT may provide the following benefits:
Avoidance of probate.
Segregation of assets.
Estate tax minimization.
Durable General Power of Attorney A power of attorney is a document that allows a person (known as the "principal") to appoint another person or organization to handle affairs while the Principal is unavailable or unable to do so. The person or organization the Principal appoints is referred to as an "attorney-in-fact" or "agent." A general power of attorney can grant the agent limited or broad powers as specified in the document to manage the principal’s financial affairs and property. Some of the powers that may be granted include:
Handling banking and securities transactions.
Entering safe deposit boxes.
Buying and selling property.
Purchasing life insurance.
Entering into contracts.
Filing tax returns.
Handling government benefits.
Maintaining and operating businesses.
Making gifts, including split gifts.
Making transfers to RLTs.
Health Care Power of Attorney A Health Care Power of Attorney allows you to designate an agent who will have the authority to make health care decisions on your behalf in the event you are rendered unconscious, mentally incompetent, or otherwise unable to make such decisions. A HIPAA (Health Insurance Portability and Accountability Act) Authorization also is advisable. It allows medical providers to release your protected medical information to another person. You may include the HIPAA language in the Health Care Power of Attorney, or may use a freestanding document.
Living Will / Advance Directive A living will, also known as an advance directive, is a legal document used to make known a person's wishes regarding life prolonging medical treatments. The person creating the living will (the declarant) indicates which treatments the declarant does or does not want applied in the event the declarant suffers from a terminal illness or is in a permanent vegetative state. A living will does not become effective unless the declarant is incapacitated. Until then the declarant will be able to direct his or her own treatments.
Harvard Business Review: Don't Let Your Inner Fears Limit Your Career FEAR is a natural and universal human phenomenon, affecting top executives as much as anyone else. Here are the fears we've found that most commonly plague executives: 1) Fear of Being Wrong, 2) Fear of Not Being Good Enough, 3) Fear of Missing Out, 4) Fear of Being Victimized or Taken Advantage Of. When leaders are controlled by fear or when they pretend it's not there, they can be crippled by it and become powerless. Here are four steps to open up about your fears which will make you more relatable and approachable as leaders. Step 1: Acknowledge the fear, Step 2: Interrogate the fear to better understand it, Step 3: Choose a different course of action, and Step 4: Act on that choice - in a way that aligns with your values. These steps will make any executive team far more cohesive and effective, and ultimately the business they run stronger and more successful.