First Principle of Basic Estate Planning: Get Started

10/31/2011 Articles
North Bay Business Journal

People have a natural reluctance to talk about their own death or incapacity, let alone planning for either event. This is especially true if you’ve just gotten married and are starting a family or have just graduated from college and are starting your first job. The thought of death or incapacity is the farthest thing from your mind as these events are at least 50 years away, right?

However, death and incapacity are rarely planned events and timing is impossible to predict. Life-changing events such as marriage, divorce, the birth of a child or the death of a loved one motivate many to get serious about the need for an estate plan. Regardless of the source of motivation, all adults should have an estate plan notwithstanding their wealth, marital status or parental status. It is never too soon to start planning. In fact, you may have already begun the process without even knowing it, as most people have already engaged in forms of estate planning – a beneficiary form completed for a life insurance policy or a 401(k) plan at work, or a healthcare directive completed upon admittance to a hospital. Planning is most successful if it is intentional and comprehensive as it will capture your wishes more accurately.

Estate planning is a process. It ensures that your affairs are in order in a way that minimizes taxes, legal costs, court intervention and stress. More importantly, it will provide you with peace of mind and preparedness for your family when dealing with the inevitable. Contrary to what you may think, estate planning is not just about taxes. Estate planning addresses issues including distribution of property at your death, the naming of an agent to manage your financial affairs during your lifetime if you are unable to do so, the naming of a guardian to raise your minor children, and the appointment of an agent to make healthcare decisions.

Key Estate Planning Documents

An estate plan should be tailored and specific to your unique life circumstances. The foundational documents for a basic estate plan include a will and/or trust, durable power of attorney, and an advance healthcare directive. If you have one or more minor children, nomination of a guardian may also be included in your set of documents.

Trust Agreement

A trust is an agreement that provides instruction on how to manage and distribute property. When you create a trust (as the “Grantor” or “Trustor”), you transfer property into the name of trust to be managed by you or someone else chosen by you (the “Trustee”) for your benefit or the benefit of another (the “Beneficiary”). Although there are different types of trusts, a basic plan includes a revocable trust. With such a trust, you are almost always the Grantor, Beneficiary and Trustee so that during your lifetime you maintain total management and control over your property. It is at death or incapacity that the successor Trustee follows the instructions provided by you for further management and distribution of your property.

A trust can include tax-saving strategies and may be as simple or as complex as needed in order to meet your wishes for the management and distribution of your property. It also has the added bonus of avoiding court supervision. In designing a trust, key considerations include (1) who will be the Trustee; (2) to whom your property will be distributed; and (3) how your property will be distributed: outright, in trust, or in installments over time. 


A will is a document that sets out your wishes for the distribution of your property after death. The management and distribution of your property is under supervision by the probate court or “probated,” and the person responsible for seeing that this is done properly is your “executor.”

Complimenting a revocable trust is a “pour over will,” which provides that if assets are not titled in the name of your trust, they will pour over into the trust. A probate of the property or court supervision is required to complete the transfer of the property into the trust. Hence, when a trust is created, retitling assets in the name of the trust is key.

If you have a minor child, a will may be the document in which you appoint a guardian to raise him or her.  

Durable Power of Attorney

A durable power of attorney authorizes someone to act on your behalf during your lifetime if for some reason you are not available or capable to manage your property. The person appointed to act is called an “attorney-in-fact” or “agent.” A special power of attorney authorizes the agent to act in a limited capacity, or to act for certain limited or specified purposes. A general power of attorney authorizes the agent to do anything. Either power of attorney can be made so that it is effective immediately upon signing or at a later date tied to a determination of your incompetency.

Advance Healthcare Directive

An advance healthcare directive authorizes someone to make medical decisions on your behalf during your lifetime if for some reason you are not capable. The advance healthcare directive can also act as a “living will,” which is a written expression of whether you prefer certain medical procedures to keep you alive.

All of the above described documents comprise a basic estate plan. Once these documents are in place, you should review your plan regularly to ensure your plan changes as your life changes. The basic estate plan addresses death and taxes and how to manage both, along with other important issues, such as healthcare decisions. An estate plan is a means to ensure peace of mind and organization for you and your loved ones and allows you to decide how your property will be managed and distributed in the event of your death or incapacity.

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