Estate planning is a topic that most people would rather defer, for obvious reasons. But it becomes a much more attractive subject once you understand its real purpose.
Let’s start with the tough part: admittedly, if you were going to be around forever you wouldn’t really need some elements of an estate plan. Taken as a whole, though, your estate plan is not so much about your demise as about documenting your wishes on a range of subjects and putting in place the legal structures and strategies to ensure that those wishes are carried out.
Understanding the Essentials
Everyone is familiar with the concept of a will, which designates how you want your property to be distributed after your death. Not everyone understands that basic estate plans now typically include at least three other documents that help ensure that your wishes are carried out if you become incapacitated, whether or not that incapacity is permanent.
- Living Will: (“end-of-life use”): document your wishes for healthcare – particularly extraordinary measures.
- Health care proxy: designates a person of your choice to interact with your healthcare team and make treatment decisions on your behalf.
- Durable power of attorney: empowers a trusted advisor to make business and financial decisions on your behalf.
These documents not only provide great peace of mind, but may also be useful if you have an unexpected health issue, even if you eventually recover.
Evaluating Strategic Options
More complex estate plans utilize a variety of trust structures to achieve certain specific aims. These are often known by a bewildering array of acronyms: CRUT, GRAT, GRIT, CRAT, ILIT, QPRT, etc. Before considering any trust structure, it is important to know what your goals are and how a particular trust can help you achieve them.
Various structures can help you:
- Reduce your estate’s tax liabilities (most trust structures in which the grantor does not retain control)
- Generate a stream of income for yourself (CRAT, GRAT)
- Preserve the income-generating potential of an asset for your heirs (QTIP)
- Transfer title to residential property while retaining the right to use it (QPRT)
- Streamline the probate process (most trust structures)
- Provide for an individual who is unable to manage financial affairs (SNT)
Holm & O’Hara LLP’s trusts and estates attorneys can help you map out your immediate and longer term objectives and evaluate your options for achieving them. Our publication, “What is truly important to you,” provides more information about strategic estate planning, including some composite case studies to show how different estate plan scenarios could play out, both in financial terms and in assisting with meeting larger goals. Once you have reviewed it, contact us to arrange for a consultation. Even if you have a current estate plan, you might benefit from evaluating how likely it is to help you achieve your current goals.
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