EP101: What is Estate Planning?
TO: You - New EP 101 Subscriber
FROM: Me - Attorney Heather Hazelwood, Ampersand Law
Welcome to your sneak peek of the first substantive email of Estate Planning 101!
Three notes to get us started:
You'll see that I capitalize the words Will(s) and Trust(s) when referring to the estate plan documents. I do the same for Health Care Power of Attorney and Durable General Power of Attorney. If you're a grammar enforcement officer, you may take issue with this. However, it makes understanding what's going on a lot easier. Especially when I use the words in their other contexts: will (future tense verb) and/or trust (noun or verb indicating reliability, truth, ability, or strength).
Any external links I include are not endorsements or ads. They are additional sources of information that may be useful.
Just because you are reading this, I'm not your attorney, and you’re not my client. Put another way, these emails are not legal advice. They are for informational purposes and not legal advice (for you or anyone).
With those in mind, let's get going!
What is estate planning? All of the property (financial, real estate, and personal) you own at the time of your death makes up your estate. Estate planning is the process of making decisions about what should happen to your property after your death and then documenting those decisions. It can include plans for the care and upbringing of minor children. And depending on the decisions you make and the documents you prepare - an estate plan can also apply if you become incapacitated.1
That's the legal and logistical "what is estate planning" answer. I think of estate planning in those ways. And I also think it has a purpose above and beyond all of that. Estate planning is a gift for yourself and your loved ones. It provides peace of mind now and certainty later. It does this by eliminating "what if..." worries now and ensuring no one is left wishing they could ask you what you want(ed) later.
What documents are involved in estate planning? Wills2 and Trusts3 are the most common documents to detail what you want to happen to your property after you've died. These documents give your named actors (Executors, Personal Representatives, Trustees, etc.) the legal authority to carry out your instructions. While Trusts can have functionality during your lifetime, a Will can only be used after your death (until then, it's just a plan).
If you stop as soon as you have a Will (and/or Trust), there's good news and bad news. First, the good: congratulations, you're above average! More than 50% of adults in the United States die without a Will (and/or Trust). And now, the bad: you stopped before you finished the estate planning process.
Estate plans should also include documents that only apply during your lifetime. They are Powers of Attorney (POA). POAs give your named person(s) instructions and the legal authority to do certain things for you during your life and at the very end of your life. The two main types of POAs are the Durable General POA4 and the Health Care POA.5 They are important no matter what, and they are essential if you become incapacitated or incompetent.
While I won't be spending more EP101 time talking about POAs, it's not because they aren't necessary. In fact, when I'm consulting with a potential new client, POAs are a deal-breaker. If you insist that you don't need POAs or refuse to include POAs in your estate plan, I'm not (going to be) your attorney. For a bit more on POAs, you're welcome to read this hot-off-the-presses blog post, What's the Big Deal about POAs?
Okay then, who needs an estate plan? Well, estate planning tends to be helpful (and in some situations, critical) for people who:
have a child under age 18
have children from more than one relationship
are married
are re-married
have a spouse who was previously married
are in a committed long-term relationship
are in a domestic partnership (registered at the local or state level)
own a home
want certain items of property (including money) to go to specific people or institutions when they die
have different religious, moral, and/or ethical opinions about end-of-life and post-death decisions than their spouse/children/siblings/parents/loved ones
are not particularly close to, or don't have, a spouse/child/sibling/parent.
are retired (or approaching retirement)
are in (or close to) the last stages of life
have a serious (life-threatening) illness
want to make things as straightforward as possible for their loved ones
Any of those sound familiar?
FAQs (from you & others). Do you have a Q that needs an A? Email us here.
Preface: Have you ever heard the joke, "What's a lawyer's favorite answer? It depends." It's funny because it's true. I can answer nearly every FAQ I have that way. Also remember: I'm not your attorney, and we don't have attorney-client privilege. I can't give you legal advice or answer any question that deals with the fact-specific particulars of your situation. Even if they are "hypothetical" or about your "friend."
Q: If I move from NC to another state, or if I moved from another state to NC, do I need to redo my Will?
A: It depends! The good news is that the US Constitution's Full Faith & Credit Clause applies to this situation. This clause instructs that if you executed your Will legally in one state, it is legal in every state. But, here's why it depends: there are specific requirements for Wills under North Carolina law that not all states have. So, if your out-of-state Will doesn't meet those requirements, additional steps are required to admit your Will for the probate process.
Q: Is estate planning also financial planning?
A: They are not the same, but there is common ground between them. And for some individuals, estate planning and financial planning are very much intertwined. But – they are separate things and often require the expertise of different professionals. More here.
Q: Does estate planning involve tax planning?
A: It depends! Estate planning often involves/overlaps with tax planning in certain situations. The two main ones are:
If you have a very high net worth (very high = more than $12,060,000.00 in assets); and/or
You have real estate and investment holdings that could be subject to capital gains tax when sold.
Q: Does estate planning involve Medicaid planning?
A: It depends! Medicaid is health coverage provided by the federal government, available to people who meet the eligibility requirements. For some people, part of the estate planning process involves asset divestment strategies to meet Medicaid eligibility standards in the future. More here.
Made it this far? Well done!
Next time: What does it mean to "avoid probate?" Why do people say it's important to "avoid probate?"
Ready to get started with estate planning? Want to consult with me about your specific situation? Go here.
1/Incapacitated: you are no longer able to take care of life tasks and decisions either for a limited period or perhaps for the rest of your life.
2/Will: also known as Last Will or Last Will and Testament.
3/Trust: there are many kinds of trusts. Some apply only after death; others apply during life and after death.
4/Durable General POA: also known as a durable power of attorney, a general power of attorney, and a power of attorney for property and finance, among other names.
5/Health Care POA: can include or be accompanied by an advance directive for a natural death (also known as a Living Will).