Despite popular opinion, the benefits of estate planning are not limited to the rich and powerful. Taking care of your estate before death not only ensures a quick and painless transition for your loved ones but can avoid unwanted or awkward situations in complex cases, including owning properties in separate states, outdated or misinformed beneficiary designations, and uncontrollable probate outcomes.
A competent estate plan benefits you not only in death, but in life as well. Regardless of your wealth or status, estate planning tools exist to give you greater control over the distribution of your belongings, as well as providing the potential for asset protection, continued charitable contributions and legacy actions after death, plan for unforeseen incapacity or mental incompetence, and crucial tax management benefits.
Knowing what to ask your estate planning attorney can help you find the right one to work with. Here are 6 key estate planning questions to keep in mind:
1. How Long Have You Been Practicing?
Experience matters. As does specialty. A law firm specializing in tax law might have recently branched out into estate planning, but that does not mean that it is the firm’s primary focus – it might be the focus of their newest hire, but they may be untested.
Gauging exactly how long your prospective attorney or tax firm has been working on estate plans, and how much experience their most senior estate planning professional has had can give you a better idea of who you might be working with.
2. Who Executes the Estate Plan?
It is one thing to discuss estate planning with a seasoned professional. But in larger firms especially, a lot of the leg work may be passed down to younger, less experienced lawyers or legal aides.
Discuss who will be working on your estate plan, who you should be corresponding with, and how much experience they have specifically on working with estates such as yours.
3. What About Estate Tax Considerations?
While the federal estate tax exemption remains quite high since it was raised in 2017, that may change in the near future – and there are state estate taxes to worry about as well.
Your estate planning professional should not only be well versed in estate planning specifics, but should inform you about the benefits of leveraging estate planning tools such as trusts to minimize your tax liability both in life and in death – and help you determine whether the costs of managing these tools are outweighed by the benefits of such tax optimization.
4. Should I Set Up a Power of Attorney?
Power of attorney documents are designed to serve you solely in life, rather than in death. But in the context of estate planning, their primary purpose is to serve you in incapacity.
While most ordinary powers of attorney are not worded to last during a principal’s incapacity, a durable power of attorney is explicitly written to allow an agent to keep acting in the name of their principal, usually to protect their financial or healthcare interests, e.g., taking on payroll tasks and managing ongoing costs and debts, making healthcare decisions with the principal’s doctor, and so on.
Should you create a power of attorney? There are pros and cons to consider, and you may want to expand your estate plan outside of being a contingency for death alone.
5. What Would My Probate Process Look Like?
The probate process occurs after death, when a loved one or associate of yours petitions for probate with a copy of your death certificate. Probate officially begins in court and involves legitimizing your last will (or beginning probate intestate, i.e., without testament).
While the probate court oversees the process, your chosen executor (or an executor named by the court) will carry it out.
Probate will involve notifying potential creditors and beneficiaries, managing and taking stock of the total inventory of your estate, overseeing the resolution of final debts and tax affairs, and the eventual distribution of your belongings.
In some cases, probate can take a few months. In other cases, it can take well over a year. Your state of residence and the complexity of your estate are influencing factors.
A competent estate planning professional can walk you through your probate process based on the information you provide them, and advise you on how to minimize or expedite it.
6. Will or Trust?
Taking the opportunity to learn more about estate planning can help you make better, more informed decisions surrounding your estate and its management, both before and after death.
When people think estate planning, the first thing they tend to think of is the last will and testament. And while that is a common component in most estate plans, it’s not necessarily the first thing you should take care of. Your last will and testament is a single document – only the newest, last dated, witnessed, and notarized will can be valid.
Wills can be amended through special codicils, which must similarly be witnessed, signed, and dated before your death.
It is important to have impartial witnesses present when you sign your will, because wills must be proven to have been written with full mental equity and awareness before they can be validated, with only a few certain exceptions.
In addition to determining who gets what, a will can be used to name an executor for your estate – whose job will be managing the logistics of organizing and distributing your belongings after death – as well as naming would-be guardians for your surviving minor dependents.
Trusts, on the other hand, are an established entity defined and created through a notarized trust document. Trusts are more flexible than wills and are used for plenty of purposes outside of estate planning. A trust allows you to separate yourself from your belongings, partially or completely, placing them in the control of a managing trustee in your stead.
Trusts can outlive their grantor (creator) and are often written to manage and eventually distribute their contents to chosen beneficiaries after the incapacity or death of the grantor. Trusts can also be used to distribute their contents back to yourself, for example in the case of a blind trust set up to minimize any conflict of interest in a political setting.
This flexibility comes at a price. While trusts can be written to do a number of things, they must be continuously managed by a competent trustee. A will, on the other hand, is only executed once by your chosen executor.
A will is often compared to a trust, in that both have the capacity to distribute things you owned in life to those who survived you.
But they are synergistic, rather than antagonistic. Both can be used together to set up an estate plan that prioritizes efficiency – distributing certain assets through a trust, and certain assets through a will, minimizing the probate process, ensuring your priority bequeathments are taken care of, and working hand-in-hand with other simplified bequeathment methods, such as beneficiary designations.
Ask These Estate Planning Questions
Setting up a competent estate plan is a bit more complicated than crossing the Ts and dotting the Is on an online template, however. An estate planning professional can help you discover the different tools of the trade and develop a plan that best suits your needs and financial circumstances – that means no excessive trusts, no expensive and unneeded plans, and no burdensome costs for no extra benefit.