A 4-Step Guide to Tackle Estate Planning in 2018

Senior woman meeting with agent

When your loved one is no longer able to make their own healthcare and financial decisions, you’ll want to be able to carry out their wishes as they imagined you would. However, if they become incapable of communicating their desires to you, having a proper estate to turn to can help ensure those last wishes are fulfilled.

“People used to think that estate planning was something for the ultra-wealthy,” says Devon Rood Slovensky, an estate planning attorney in Roanoke, Virginia. “Estate planning isn’t just about assets–it’s about your health and your ability to take care of yourself. And everyone can benefit from planning for health and mental impairment, regardless of assets.”

The law considers an “estate” to mean all of the property a person owns, both outright and jointly, such as bank accounts, real estate, stocks and bonds, vehicles, jewelry, retirement accounts and even pets. Interest and money that a person is entitled to later, such as insurance proceeds and securities dividends, are also considered part of a person’s estate.

Here are a few key steps to help get your loved one started.


1. Start the process now

When it comes to getting started with estate planning, it’s the sooner, the better, says Candice Aiston, an estate planning attorney in Portland, Oregon.

“It’s important to get things done when the elder is able to make decisions on their own. Figuring out when that point is can be hard for a lot of clients who have dementia or who have periods when they are at full capacity, and others when they are not,” says Aiston.

If a person becomes incapacitated and doesn’t have an estate in place, their family has to go to court to get a conservatorship to make their financial decisions and a guardianship to make their medical decisions.

Since age isn’t the only factor that goes into someone being unable to make their own decisions, Aiston says it’s never too early to start estate planning.

“The best time to do estate planning is when you turn 18, but other than that the best time to do it is now,” she says.

Slovensky advises getting started by having the elder take an inventory of their resources. That includes not only tangible resources like their home and brokerage accounts, but also the people in their lives whom they love and trust.

“They need to think through who they can rely on, and backups to those people,” says Slovensky.

If you’re unsure of how start this conversation, Aging Life Care Manager Debra D. Feldman suggests telling your loved one a story about a friend who encountered problems due to a lack of estate planning.

“This is a good way to show them what could go wrong, so that they can think about how they don’t want that for themselves or those taking care of them,” says Feldman.


2. Select a healthcare power of attorney

Your loved one should start by selecting their power of attorney for health care. This is the person named to make medical decisions for them if they’re unable to do so themselves. This person is designated in a legal document called an “advance health care directive,” or depending on your state, it may be referred to as a “living will,” “healthcare proxy” or “durable power of attorney for healthcare.” Although state laws differ slightly, these directives are usually enforced only if someone is close to death from a terminal condition or in a permanent coma.

Having a healthcare power of attorney lets healthcare providers know what life-prolonging treatments a person does and doesn’t want if they’re no longer able to communicate their wishes with medical professionals. The healthcare power of attorney has the right to make sure their loved one’s wishes are enforced.

“These documents help make difficult decisions for family members easier, and lets the hospital know who to look to for answers,” says Slovensky.

When choosing a healthcare power of attorney, Feldman says people should consider who will see their wishes met.

“Parents often just pick their oldest child for power of attorney for healthcare and power of attorney for property just because they are the oldest or don’t want to insult or offend them. However, this person may not be best-suited,” Feldman says.

She notes that many of her clients appoint one child as their power of attorney for healthcare and another for power of attorney for property. While this may work when siblings get along, Feldman notes that if the adult children don’t get along, it could cause problems.

“What happens is the child who has healthcare proxy wants to move mom or dad into XYZ nursing home and the other child who has property proxy says ‘no’ and won’t pay for it,” she says.


3. Name a durable power of attorney

While the healthcare power of attorney is able to make decisions related to a person’s health, only the durable power of attorney (also called a “financial power of attorney”) can make financial decisions on their behalf, such as applying for Medicaid, paying for a nursing home, setting up a revocable living trust to manage assets after they die and more.

 If a person becomes mentally incompetent, is in a coma or experiences another debilitating medical emergency and doesn’t have a durable power of attorney for finances, a judge will have to appoint someone to manage their finances for them, even if the appointee is unfamiliar with the person or their money matters.

“Absent a power of attorney, your family would have to go through a guardianship procedure, which costs money and takes time, even in an emergency. A guardianship proceeding is generally at least 25 times more expensive than preparing a power of attorney, and can greatly exceed that if your family members fight over who will make the best decisions,” explains Slovensky.

Aiston adds that some states recognize what’s known as a springing power of attorney, or a financial power of attorney who doesn’t get power until their loved one is incapacitated.

“This is a bit safer than the durable power of attorney, but many states don’t offer it,” Aiston notes.


4. Choose how assets are handled

If a person dies and hasn’t set up a will or trust, their assets will pass by the rules of intestacy, or “intestate succession,” which can vary from state to state. Under these rules, the state will create a will for the deceased person that distributes his or her estate to their surviving heirs, such as spouses, children, other descendants or parents. If none of these people exist, the person’s property may go back to the state.

“This might be okay in some circumstances. For example, if you don’t own an home, don’t have significant assets, you have a nuclear family (no stepchildren), no minor children, and your adult children get along (and you want them to have everything),” says Slovensky. “[But] most Americans don’t fall into these circumstances.”

 Choosing to have a will or trust is the best way to make sure a person’s assets got where they want them to.


Estate Planning 101

What is a Will?

A will is the simplest estate planning document. It tells a probate court what a person wants done with their assets after they die. It does not include healthcare decisions. Some of the things a will might include consist of the following:

  • Who the person wants to leave their property to
  • Who they want to be their guardian and manage property for any dependent children
  • Who should act as their representative or executor to manage their estate, pay debts and taxes, and distribute remaining property

“For a lot of families, [a will] is good enough, but significant assets or additional complicating factors may make it necessary to set up a trust,” notes Slovensky.

For instance, a will may not be detailed enough for people who want to give more specific instructions about what happens to their assets, such as this scenario: a person wants to specify that their first child will inherit their house after they die, and that their first grandchild gets the house after their parent dies.

Other situations that may make a will insufficient include:

  • Providing management for property that goes to a child with special needs or a disability
  • Having children from one or more prior marriages who are likely to conflict with a current spouse
  • Concern that someone may claim the will is invalid because they were mentally incompetent or subject to fraud or duress when writing them

Aiston points out that having a will does not save loved ones from going through the courts.

“Many people think that doing a will means that they are not going through the courts and saving their family from going through the probate process, but actually the will’s whole point is to go through the probate process,” she says.


What is a trust?

There are two kinds of trusts. Revocable trusts allow a person to change their terms at any time, as long as they are mentally competent to do so. Irrevocable trusts can’t be changed or amended once they’re created.

The main purpose of a trust is to bypass the probate court system. When a person has a trust, they will most likely still have a will, a power of attorney and an advance medical directive.

Like a will, a trust outlines a trustee and what a person wants done with their assets. When a trust is drafted, a person transfers titles to most of their assets into their trust, so that the trust owns these assets. For some assets, like life insurance, the beneficiary is changed to the trust so that the payouts go to the trust. Then when a person becomes incapacitated, their trustee can step in and manage their assets without having to deal with probate court.

“The reason people want to avoid [probate court] is it can take a year or more, can be costly, and it’s a matter of public record. Trusts are the easiest and cleanest way to go that will cause family the least amount of hassle,” says Aiston.

Slovensky outlines a few other benefits of trusts:

  • They are constructed to carefully plan for tax treatment and minimize taxes involved with transferring wealth
  • Created for bespoke, unique circumstances, such as caring for a special needs relative to ensure that inherited wealth does not dis-entitle them to government benefits
  • Provide for the ongoing administration of assets, so that assets are carefully managed over a longer time period to ensure multiple generations benefit from wealth accumulated over a lifetime

While trusts do cost more to put together upfront, Aiston says they save family members money in the long-run.



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