A complete estate plan must include certain essential parts. In fact, it is similar to building a snowman. The traditional snowman has several critical components: bottom, middle, and top snowballs, as well as “arms” and a “ face.” If any of these are left out, the snowman can look a little odd! The consequences of an incomplete estate plan are much more serious, however. If you leave out important documents when you create your estate plan, it is unlikely to accomplish all of your goals, and the benefits you thought you would gain could melt away.
Step 1: Shape a strong foundation—the trust
The foundation of a snowman is the large snowball at the bottom that acts as its base. Likewise, a trust is the foundation of your estate plan. It enables you to name a trusted individual as co-trustee or successor trustee to carry out your wishes upon your death and to manage your affairs if you become so ill you cannot do it yourself. Using a trust, you can specify that distributions from the trust be made to your beneficiaries for specific purposes, e.g., college tuition or health care expenses, or at a certain age. Trusts are often used to ensure that your money and property benefit your own family, rather than, e.g., the new family of a spouse who eventually remarries. In addition, trusts provide a means to pass on your money and property to your family and loved ones without the inevitable delays and costs that accompany the probate proceedings required when you use a will. Trusts also provide your family with more privacy than a will—as your will becomes part of a public record once it is admitted to probate and can be viewed by anyone. Certain types of trusts can also be used to protect your money and property not only from being accessible to satisfy the claims of your future creditors (including a divorcing spouse), but also those of your beneficiaries. These are only some of the benefits that a trust can provide as the bedrock of your estate plan.
Step 2: Form a solid core—the medical power of attorney
Additional strength and stability are provided by the snowman’s middle snowball. You can similarly solidify your estate plan by executing a medical power of attorney that names a trusted agent who can make medical decisions on your behalf if you cannot make them for yourself or are unable to communicate them to the relevant health care providers. Your agent is bound, to the greatest extent possible, to make the decisions you would have made if you had been able to make them yourself. By appointing someone you trust to act on your behalf and making sure they have important information, such as your preferred providers, medical conditions, treatment and medical history, medications, allergies, and religious beliefs, you can gain substantial peace of mind. A comprehensive estate plan describes not only what happens to your money and property when you die, but also how your care should be handled during your lifetime.
Step 3: Cap it off—the financial power of attorney
The third step in building a snowman is adding the snowball representing the “head.” Although it is typically smaller than the snowman’s middle and lower sections, it is no less important. In an estate plan, another essential document is a financial power of attorney. It authorizes someone you choose to make financial decisions for you if you are unconscious, too ill to make or communicate them yourself, or otherwise unavailable to do so. If you do not have a financial power of attorney, your family, including your spouse in some instances, will likely have to go to court to be granted the authority to handle your financial affairs. The person the court appoints to this role may not be the person you would have chosen to handle your financial matters. You can do your family and loved ones a huge favor by making sure you have named an agent to step into this role, avoiding unnecessary delays or disputes.
Step 4: Extend a hand—the funeral instructions for your loved ones
Next, branches are inserted to act as the snowman’s “arms.” You can give your family one last hug by making your wishes for your funeral or memorial service known using a remembrance and services memorandum. Most people would rather avoid thinking about their own funeral, but if you don’t make these plans and arrangements in advance, the burden will fall on your grieving family after you pass away. You can use a remembrance and services memorandum to list people who should be notified after you pass away, provide information you would like to be included in your obituary, give instructions for handling your remains, and specify what you would like to be included in your funeral or memorial service—or to indicate that you prefer that no service be held. Don’t just assume your family knows what you want, as there is a good chance they do not. If several family members have conflicting opinions about what you would have wanted, avoidable disputes could arise, causing additional heartache, delay and potential expense. Taking the time to write down your wishes can be one of the most caring things you can do for your loved ones.
Step 5: Add some personality—the ethical will or letter of instruction
No snowman is complete without the coals and carrot used to create its “face” and add a little personality. You can use an ethical will, sometimes called a letter of instruction or legacy letter, to infuse your estate plan with your personality. An ethical will provides a way to communicate important knowledge, experiences, and values you have acquired over the course of your life to your family and loved ones. The contents of the ethical will are likely to vary widely from individual to individual because each of us is unique and has lived a life unlike anyone else, so the wisdom each person finds valuable and wants to pass on to his or her loved ones is different. The ethical will is not a legally binding document, but it may be one of the most precious gifts you can give to those you will eventually leave behind—as well as future generations of your family who otherwise would not have a chance to know you.
Don’t Give Your Estate Planning Attorney the Cold Shoulder—Keep them in the Loop
Without a complete estate plan, you are skating on thin ice. Make sure your estate plan has more than a snowball’s chance in the tropics of accomplishing your wishes. An experienced estate planning attorney can help you create a comprehensive plan without being snowed under by all of the details necessary to address your unique circumstances. Don’t wait for a cold day in July to build your estate plan!