Gaining control over our finances is usually at or near the top of all New Year’s resolutions. What many people don’t realize, though, is that good legal planning is an essential component of our financial health. Effective legal documents can protect us from costly divorces, lawsuits and exorbitant transfer taxes. Why then, do half of us not even have a will? As an estate planning attorney, I think that many people just don’t know when or how to embark upon the process.
Here are a few tips to get you started:
For those who are young and healthy, a will is a good place to start. Once we have children, it is critically important to name a guardian who will raise them if the unforeseeable occurs. Failure to do this can mean that some strange judge will decide who raises your kids. Beyond this, it is important to decide the ages at which children should inherit assets. Whitney Houston’s will enabled Bobbi Kristina to receive more than $2 million on her 21st birthday. I would have preferred to give the trustees more discretion as to how, whether and when to make distributions. This protects beneficiaries who may be more immature than their age suggests. It also prevents the assets from counting against a young person’s college financial aid applications.
I am not a fan of online or DIY estate planning kits. No two situations are identical. We all have some “complexity” (dysfunction) between and amongst family members. Confiding in one’s attorney about loved ones with spending issues, troubled marriages, developmental disabilities, gambling and/or substance abuse problems enables the documents to protect everyone to the greatest extent possible. A “fill in the blanks” document could not possibly protect my wacky relatives from each other!
The next step is to create a Power of Attorney. This document allows me to name an agent who can sign documents and transact business on my behalf if I am mentally or physically incapacitated. This document can be immediately effective, or it can be made to “switch on” when it is needed. It is very important to customize this document based upon one’s relationship with the named agent. Young people, for example, may wish to limit the agent’s authority to simply paying bills. Older married people, on the other hand, will usually want to delegate full power to each other.
We should then give some thought to health care advance directives. Every state has a Health Care Proxy Law. This document allows me to name a spokesperson who can communicate medical treatment decisions on my behalf in the event that I cannot speak up for myself. This form is available on your State Department of Health website and can be completed without an attorney.
Once the basic documents are in place, they should be revisited periodically. If there is a major change in your circumstances- good or bad, your attorney should know. A financial windfall, for example, will likely necessitate the creation of trusts to minimize transfer taxes. Other reasons to revisit one’s estate planning include a major health condition or upcoming marriage. Both of these events should prompt some defensive asset protection planning.
Ann Margaret Carrozza is an Estate Planning Attorney who also served as a New York State Assemblywoman. She is a legal contributor to television and print media outlets. For more visit her website myelderlawattorney.com