The events of the past two years have caused (or should have caused) people to take a look at their estate planning, or lack thereof, to examine how world events, like COVID-19, and a change in administration at the U.S. federal level, coupled with some new philosophies related to taxes, will affect them. For the moment, it looks like the major proposals affecting how we do estate planning have been shelved, but they are still on the agenda to be sure. More on that later. Of primary concern is the spotlight that COVID-19 has shone on estate planning in light of the proliferation of unexpected deaths and long periods of incapacity. Tackling the basics of estate planning can eliminate the possibility of unwanted results and give you some peace of mind that, if you fall to victim to either a disabling event or an untimely death, as well other unexpected events in the lives of you and your family members, the people in charge of you, your healthcare, and your finances are the people you’d prefer to act on your behalf and will increase the likelihood that the rules they play by will be yours, rather than theirs or those of a local probate judge.
What is Estate Planning?
A simple way to understand estate planning is that it should answer 3 questions: 1) who is in charge of me and my stuff; 2) who gets to benefit from my stuff; and 3) when? In other words, if you’re alive and well, you’re in charge of your stuff, you get decide who can benefit from your assets, and when. But what if you become incapacitated and can’t make those decisions? Who will be in charge and who’s rules will they play by—the state’s or yours? When you die, who will be in charge disposing of your remains and your assets, who’s rules must they play by, and who gets to benefit? If you care about the answers to those questions, you should take affirmative steps to get a plan in place—even if it’s just the basics. If you don’t take action, don’t be mistaken, it doesn’t mean you don’t have an estate plan, it just means that you and your assets will be governed by the state’s plan. That’s right, every state has a statutory plan that dictates by whom and how your medical, financial, and legal matters will be handled if you become incapacitated and when you die.
A common horror story occurs when each partner in a couple has children from a prior relationship. I’ll use Mike and Carol Brady as an example. Mike has 3 boys from a prior relationship. Carol has 3 girls. Without planning, if Mike passes first, who gets Mike’s stuff? Likely Carol. What if Carol decides to get remarried and she subsequently passes? Who gets Mike’s stuff then? Right, Carol’s new husband, and eventually the new husband’s kids. Probably not what Mike would’ve wanted.
WHAT ARE THE BASICS?
At a minimum, there should be some basic documents in place that address the questions posed above.
1.Who will make healthcare decisions for me if I’m unable to and who’s rules will they play by?
- Patient Advocate Designation or PAD (sometimes referred to as a Medical Power of Attorney) – This is a legal document that grants one or more individuals the authority to make healthcare decisions on your behalf if you are unable to make those decisions yourself as attested to healthcare professionals. A basic PAD grants the authority to review health care information, employ or discharge healthcare personnel, consent to or deny treatment, and consent to admission into various healthcare facilities. There is also, at a minimum, some instruction from the principal about what level of life sustaining treatment they would like, if any, when facing imminent death with no, or little hope of survival. The state’s alternative, in Michigan, is called legal guardianship, which is an expensive, statute-driven, court supervised action.
2. Who will handle my business, personal and/or commercial, if I’m not able to and whose rules must they play by?
- Durable Power of Attorney for Financial or Legal Matters or DPOA – This is a legal document that appoints a trusted individual to conduct your financial and legal affairs. Often, and required in some states, like Florida, this authority is triggered upon signing the DPOA rather than upon incapacity of the principal to allow for an agent to handle your affairs if you are indisposed but not incapacitated. You can provide broad or specific authority to handle your affairs in this document. The state’s alternative, in Michigan, is called conservatorship, which is also an expensive alternative to a DPOA, and can be quite cumbersome and is often tightly controlled by the court.
3. Last Will and Testament or Will Substitute (i.e., a trust) – Most people would agree that Wills and Trusts are created to establish rules for what happens to your stuff after you die. Both can be very descriptive and deal with many contingencies. So, why would you want a trust rather than a Will? There are several reasons:
- To avoid probate – Many people would prefer to avoid the burdens, costs, and public nature of probate administration, which is controlled by statute and administered by the probate court. A properly funded trust can reduce administrative costs and keep the administration within the family group, rather than through cumbersome court processes.
- Manage Assets through the Continuum – While there are trusts that can be created within a Will, called springing testamentary trusts, those trusts must spring from the probate process and only go into effect after death. A living trust can be created to hold title to assets and provide mechanisms within the document to deal with those assets when you’re alive and well, if you become incapacitated, and, after you’re gone, protect those assets for minor children or disabled heirs.
CG Solution: Identifying Your Goals and Choosing the Right Plan
Your CG advisor can help you to identify your goals, how your family dynamics play into those goals, and how your assets are arranged to come up with the right type of plan to meet your needs.
CG Solution: Getting a Plan in Place
CG Financial Services has arranged with a local estate planning law firm to provide Streamlined Estate Planning, allowing you to tackle the basics at a lower than usual cost and with minimum time invested. CG Streamlined Planning can provide the basic living documents—the PAD, the DPOA, and basic Will and/or Trust—as well as some other important documents like HIPAA Authorizations and Funeral Representative Designations.
CG Solution: Funding Your Plan
CG advisors can also create and walk you through the oftentimes daunting but critically important “funding” of your plan. This involves making sure all of your assets—your house, your financial assets, and your tangible personal property (your stuff)—are all titled properly or contain the appropriate beneficiary designations to make your plan work the way it was designed.
Contact your CG advisor today to discuss how you can get “your” plan in place rather than the “state’s” plan and make sure that what you’ve worked so hard for is properly protected. If you already have a plan in place, be sure to review your plan and ensure the people and strategies still align with your goals and values for you family and your future.
We are honored and humbled with the trust and confidence you have placed with CG Financial to achieve your lifelong financial goals. We are here to help navigate your estate planning needs. If you have any questions, please feel free to reach out to your advisor or a member of the team. We hope you have found this information useful and look forward to helping you meet your goals.
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Advisory services offered by CG Advisory Services, a Registered Investment Advisor. Securities offered by Geneos Wealth Management. Member FINRA/SIPC. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation.
