What Comprises A Sound Estate Plan?

John Boardman

There is no more important aspect to your financial plan than an estate plan.  That might seem to be a shocking statement to some and that is likely because of the misconception of what comprises a comprehensive estate plan.  While most clients come to us focused on their investment portfolio and cash flow needs, we typically steer the conversation to the estate planning subject.  Why do we work, save and invest for the future?  Obviously, we do so to achieve financial security.  But without a sound estate plan, this financial security will vanish for the most important people around you if something unforeseen occurs.  A proper estate plan should be comprehensive in its direction of all financial assets and in coordination with the personal wishes you have.  These desires include bequests to family, protecting access to funds for children, and charitable donations, just to name a few.  In many ways, an estate plan is a blank canvas that is designed around you.

We pride ourselves in the professional relationships we maintain in the community so to speak on this subject we reached out to two of our trusted resources on the topic:  Henry “Tip” Richmond and Jeff Gehring, both Members of Dickinson Wright PLLC here in Lexington.  Jeff noted “Your estate plan should take into consideration your current and foreseeable family situation and tax/financial situation to accomplish your non-tax goals in the most tax efficient manner possible.”  This points to the idea that people work to construct their plan for different reasons but, at completion, it should accomplish both personal and financial goals simultaneously.

When looking at our clients’ plans, we notice consistency across the key components of the plan: Last Will and Testament, Powers of Attorney, and Healthcare-related documents related to authority and last wishes.  After that, there is a wide disparity in the documents that comprise the plan.  A younger couple with new children may have more intricate trust planning related to control of insurance, assets, and disposition of assets and income specific to age criteria.  A successful professional (i.e. doctor) might have more focus on asset protection from “creditors and predators.”  While among our client base of retirees, much of the planning revolves around tax, charitable, and family legacy planning.  The beauty of a comprehensive, well designed plan is that it is built around your specific situation and desires.

While most people focus on the disposition of the assets they own, the responsible parties you name must also be diligently considered because they hold a great deal of power.  Those individuals must not only be trustworthy but capable and knowledgeable enough to accomplish your plans.  Tip noted the multitude of roles you must consider and those include “who will be responsible for the physical care and custody of minor children (the guardian) , who will be responsible for administering your estate with the assistance of other advisors (the executor/personal representative), who will be responsible for deciding how trust assets are used for the beneficiaries of the trust and for overseeing the investment of trust assets (the trustee), who will have the legal authority to act for you with respect to financial matters if you are temporarily or permanently incapacitated (your financial power of attorney), who will be responsible for making medical decisions for you if you are incapacitated and death is not imminent (your health care power of attorney), who will be responsible for carrying out end of life decisions you have made in the event you have a terminal condition or become permanently unconscious (your health care surrogate), alternates to all of the preceding positions if the primary named person is unable or unwilling to act.”

As important as the initial construction of the plan, one must always be open and willing to update their plan.  Tip explained “I recommend reviewing, and potentially updating, your plan any time there is a significant change in the family or financial situations (e.g., an inheritance), change in the estate tax laws, or if you have concerns about any person you named to a fiduciary position (i.e., guardian, executor, trustee), but in no event less frequently than every 2-3 years.”

The best advice we can offer is to not be overwhelmed by the process.  It is, by far, the most neglected area we see in prospective clients.  We can simplify the process for you and introduce an appropriate attorney.  In most cases, we attend the meetings to make sure the financial goals are compatible with the personal goals discussed.  Occasionally, people get paralyzed in indecision with quantity of decision listed above; this is a big mistake.  We advise making decisions based on what you believe and know today noting we can always go back and have changes made.  It is most important that something is in place for the people you care for.

Atheneum