May 31, 2010
Based on some recent conversations, it has become clear to me that there is much confusion about estate planning. What is it? What does it mean? Why do it? How to do it? Why work with an attorney? And many more questions I hear on a regular basis. So, I’ll be doing a series of blog posts introducing estate planning and its various components. I don’t know how many posts it will be. I’m pulling many of the topics from my day-to-day conversations, so I’ll keep the series going as long as there are questions. If you have questions, please ask! I’ll make sure to work your questions into this series.
So, the first question – what is estate planning? Wikipedia defines estate planning as “the process of anticipating and arranging for the disposal of an estate.” I believe a much better definition is one I heard from a colleague of mine from Wealth Counsel:
“I want to control my property while I’m alive, take care of me and my loved ones if I become disabled, and give what I have, to whom I want, the way I want, and when I want. Furthermore, if I can, I want to save every last tax dollar, professional fee, and court cost legally possible.”
The one item I always add to that definition is: “to make sure that my children are cared for by who I want, in the way I want.” Of course, this applies only to parents who have minor and/or disabled children.
So here we have the definition, the starting point. Within the definition are many more considerations. To accomplish these goals of estate planning, the following documents are commonly used: wills, trusts, general durable power of attorney, and health care powers of attorney/patient advocate designation. And if you work with a comprehensive Grand Rapids estate planning attorney, there are additional considerations and documents meant to help you pass on your “whole family wealth” – not just what you own, but who you are and what’s important to you! Because if you think about it, the money and the “stuff” will still be around when you pass away, but it is who you are as a person that will be lost – your values, insights, stories and experiences. Check back for the next installment in this series to discover some additional considerations that are vital to having a great estate plan for your family.
Michael Lichterman is a dedicated estate planning attorney helping provide peace of mind to families and businesses in Grand Rapids, Grandville, Cascade, Forest Hills, Ada, Byron Center, Caledonia, and the surrounding areas. He specializes in the needs of professionals with minor children, doctors, nurses, and those in the “sandwich generation” (caring for parents and children), and does so from a Christian perspective. He takes the “counselor” part of attorney and counselor at law very seriously, and enjoys creating life long relationships with his clients – many of which have become great friends.
May 25, 2010
Yep, it’s that time of year again . . . traveling season. Memorial Day weekend is coming up, the kids will soon be out of school, and the summer travel season will be in full force. No matter how well we plan, we always seem to forget something before leaving on vacation – or at least think we forgot something. What about you? Have you every worried that you left the stove on, forgot to put the garage door down (I always forget that one!), or didn’t lock the door to the house? I’m sure you have. Those are some of the common worries. So let me ask, have you ever worried about what would happen to your children if something happened to you?
Most parents haven’t thought about this, or at least never did anything to take care of it. Did you know that only about 1/3 of parents have named guardians for their children . . . ONLY 1/3?! And yet we consider them to be the most precious gift and most important part of our lives (and they are!). I encourage you to take it upon yourself to put an estate plan in place to make sure your kids are cared for by who YOU want in the way YOU want . . . BEFORE you go on vacation.
I frequently get calls to the office from parents who realize at the last minute that they need a plan in place – sometimes literally a day or two before leaving! Sadly, it’s often too late to put something in place that is even somewhat thought-out before they leave. It may go without saying – procrastination is the number one reason I see for families not having the needed legal documentation in place. I can’t count how many times I’ve counseled caring parents through making these important decisions, and hear “yeah, we’ve been thinking about it for years, but have always put off the step of doing something about it.”
Here are three critically important items to have in place before vacation:
- Name guardians for your children and make sure it is legally documented – don’t let the court system decide who will care for your children. Make sure you plan for the long-term AND the short-term.
- Have a power of attorney for health care and patient advocate designation in place so your family isn’t caught in a bitter conflict over your medical care
- Have your finances in order so they aren’t lost to taxes or a lengthy court process
Make sure to take these important steps before YOU go on vacation. And make sure to work with an attorney that specializes/focuses on estate planning for families. If you have questions – ask! Give me a call, email me, or comment on this post so you can have your questions answered and have some added peace of mind before your next trip.
May 16, 2010
So your kids are graduating high school – congratulations! That is one of life’s crowning moments. It’s when we typically feel they have passed into adulthood. Soon they will be off to college, working, or both. Maybe they’ll “leave the nest,” maybe they won’t. Of course, most kids have turned 18 by the time they graduate (or they will soon after). Guess what? You no longer automatically have access to all their information – school, financial, and medical. That’s right . . . whether or not they are adults in your eyes, they are adults in the eyes of the law.
So how can you use this knowledge to help plan appropriately if an emergency situation happened to them? There are 2 main documents you need to have in place for them. When I say “for them,” I literally mean it is their legal document, they sign it, etc. This is not something you do on their behalf . . . ok, maybe they will need you to pay for it (does that ever stop?), but it is their document. They are: general durable power of attorney, and a health care power of attorney and patient advocate designation. These documents legally authorize you (or anyone your child chooses) to make decisions on their behalf relating to their finances, property, and health care. It provides them an opportunity to really think about what they want for themselves and give guidance for you (or another) if something happened to them. They should also consider having stand-alone HIPAA and Michigan Medical Records Access Act authorizations for access to medical records.
It also provides a reminder to have your own planning done. They say that we, as parents, should lead by example. So take the opportunity to put these documents (and others) in place for yourselves. And if you’ve already had an estate plan drafted that hasn’t been reviewed in at least 2 years, this is a good reminder for you to have it reviewed and updated as necessary. Your life, your assets, and the law have likely changed and they will continue to change. Your estate plan should too.
Oh yeah . . . here’s a little tip. Make sure to have the power of attorney authorize you to access their grades. Many schools do not allow access to grades without written authorization from the student. Of course that means they will have to agree to it
Michael Lichterman is an estate planning attorney focusing on the planning needs of families with minor children and those in the “sandwich generation” (caring for parents and children). He has seen too many plans fail and has a unique, relationship and service driven approach designed to ensure your planning works when it is needed most. Contact us to schedule your Peace of Mind Planning Session to make sure you have these vital documents in place.
May 11, 2010
Ok, you just have to read this post from Gregory Luce. He is in the process of evaluating the differences between an online will and one drafted by an estate planning attorney. He gives a very fair, well-reasoned analysis of the document and “extras” along with it – the positives and the negatives. As can be expected, there are flaws in the document. I encourage you to read the comments at the bottom of the post as they point out many areas of concern. Some of the items could cause the “effect” of the will to be drastically different than what Mr. Luce intended.
Of course I made sure to add my $.02, which centered on the wholly inadequate guardianship provisions. I regularly refer to 6 common mistakes that parents make when naming guardians for their children and most, if not all, of them show up in this situation.
Read the post, read the comments, and then let me know what you think. Sure, it may be less in the short run to do the cheap online will and have the misplaced peace of mind it provides. But at what cost? Disinheriting a child? Having someone challenge it and win? Having someone taking care of your children who you would never choose . . . or not in the order you would choose? I look forward to your comments!
May 7, 2010
Say what? Yes, you read that right. It is the title of an article I read at the Motley Fool (read it by clicking here). The main focus of the article is how you want to be remembered after you are gone and how your estate planning (0r lack thereof) can greatly influence your legacy. They put quite an emphasis on wills, which is interesting because many of the more complex situations the article talks about are far better handled through a trust. And in some of the examples, a will is almost completely inadequate. I would also suggest that you review your plan every 3 years, at a minimum, rather than the 5 suggested by the article. Think back three years and ask yourself how much the law, your life, and what you own has changed. Those items change on a regular basis – so should your plan.
I’m happy to see them mention estate planning in the context of disability planning. This is often overlooked . . . sadly, even by some lawyers. Estate planning is not just “death planning.” It is more than that . . . it is ensuring that the right decisions are made on your behalf if you are unable to make them yourself due to incapacity or disability.
What do you think about the article and the issues raised by it? Please feel free to share – I enjoy reading and responding to the comments and emails.
May 4, 2010
Although statistics show that the number of people who have an estate plan is not increasing, I do see a larger portion of individuals and couples making the decision to have a trust-based estate plan. That is, an estate plan where a trust is the main document that controls how things are distributed when they pass away. One of, if not the, most important decisions you make with a trust-based plan is who will be the trustee and who will be the backup (“successor”) trustees. The trustee is the person/people/entity that makes sure the terms of the trust are followed. Depending on the trust’s design, the trustee may have a large amount of discretion on who receives money/property from the trust, how they receive it, and when they receive it. Yet, in many cases, the decision on who will be the trustees/successor trusties is made hastily, without much thought.
This can be a big mistake! If you have done your planning correctly and fully “funded” your trust (e.g., transferred assets to it), your trust will have most (if not all) of your assets. Considering that the trustee will make certain decisions relating to the trust, the choice should not be taken lightly. The trustee should be someone you trust (no pun intended . . . ok, yes, the pun was intended). However, don’t stop the inquiry there. It should also be someone who has sufficient financial management and administrative ability (or is wise enough to hire professionals to handle those tasks for them). And consider the option of splitting the trustee role among one or more people/entities. For example, you could have a “distribution trustee” who determines when to make distributions, and an “administrative trustee” who keeps track of all the accounting, tax, and other detailed financial matters.
I recently had a conversation with a great client. She shared with me that her father had a trust set up and properly “funded” (I say bravo to him, because not “funding” the trust is the single biggest mistake I see when reviewing estate plans). He named a local bank as the trustee for distribution and administrative purposes. He set out several scenarios in his trust about how he wanted to provide for his children (education, businesses, homes, etc.). One of the main assets in the trust was stock in a certain company. Long story short, the stock dropped significantly in value and the trustee (the bank) would not sell it. It believed the stock would come back and that to sell it at the depressed price would violate the bank’s duty as trustee. This all happened about the time this client was supposed to be getting a distribution to help with education. She never did get the distribution for education (or much else for that matter). The good part is that she did a great job on her own and is quite successful today.
I’m not saying you shouldn’t consider a bank or trust company as a trustee, I give the example to show how important it is to fully consider the various options for who the trustee is. Each situation is different. That is why you need to make sure your estate planning attorney takes a client-centered relationship approach to your planning . . . not a transactional approach.