You might have scheduled an appointment to see an estate planning attorney to get your affairs in order. An estate attorney can help you organize your estate plan, but there are only so many things that your estate planning attorney can do for you.
This article will help you understand:
- The different aspects of the estate planning process
- What you should expect an estate planning attorney to help you with
- What an estate attorney WON’T help you with
- What estate planning questions you should ask yourself before your estate planning appointment
Let’s start with a quick overview of the estate planning process.
Aspects of the estate planning process
To put it simply, the estate planning process exists to answer the following question:
“What happens to me, my loved ones, and my assets, when I’m no longer able to make decisions for myself?”
Everything you do in estate planning is to prepare for the possibility that an important decision will be made about you, someone you care about, or your assets, without your being able to discuss the matter with them. So it’s important for you to think critically about every aspect of your life that someone else might have to make a decision on.
From there, proper estate planning is simply documenting your wishes so your intentions can be executed when the time comes.
What an estate attorney can help with
Create your legal documents
Estate planning attorneys are, in fact, attorneys, so they can draft all the legal documents you need, from a last will and testament to a durable power of attorney, and most trust documents. These documents will be in accordance with the prevailing state law at the time the documents are drafted. This is an important point that we’ll revisit when we talk about what estate attorneys won’t do.
Give you legal advice
Because they’re lawyers, estate attorneys can also give you legal information and help you understand the legal aspects of estate planning. Because estate planning documents usually bestow some sort of legal authority to another party, an estate attorney can walk you through the legal aspects of your estate planning and answer any important estate planning questions you might have from a legal perspective.
Walk you through all aspects of a comprehensive estate plan
As experienced estate planners, any estate planning attorney can help you walk through all parts of your estate plan, so you can understand the impacts of important decisions.
However, there are some things that no estate planning lawyer will do for you.
What you shouldn’t expect your estate planning attorney to do
Automatically review & update your estate planning documents
When I had financial planning clients, I would routinely see clients with estate planning documents that were 20-30 years old. The problem with this is that state laws change over time, which might impact your estate plan.
Time isn’t the only factor. Many people move from state to state over the course of their lifetimes. As a result, an estate plan that makes sense in one state might not be consistent with state laws in another state.
Of course, you don’t always need to make updates. Some legal documents might last for 20-30 years or more without significant changes. But you should have them reviewed periodically.
It’s generally a good idea to have your estate documents reviewed:
- Every 5 years
- Whenever you move to another state
- When you experience a major life event (birth, death of a family member, change in marital status, other major changes, etc.)
Even then, don’t expect your estate lawyers to keep you on task to regularly review your documents. And don’t expect them to follow you across state lines.
Retitle assets for you
There are certain estate planning techniques that require retitling of assets, such as financial accounts, personal property, or real estate. We’ll use a revocable trust as an example.
NOTE: This is not a suggestion or legal advice. A revocable trust is just one of many estate planning tools that estate attorneys may discuss with their clients. A revocable trust may (or may not) be appropriate for your financial situation, but that is a question you need to discuss during your estate planning appointment.
Let’s imagine that you and your spouse decide to establish a revocable living trust (not a suggestion, simply a common tool people use to simplify their estate planning). Your estate attorney drafts the documents, you come in and sign them, and voila! You now have a revocable trust document.
So what? Your trust isn’t any good if you don’t have assets titled in the name of the trust! Your trust exists to help you manage your assets. But your trust isn’t any good if your assets aren’t in the trust.
Sometimes, people expect that the lawyer will do all this for them. And they couldn’t be further from the truth. Some estate lawyers will offer to help when it comes to retitling personal property, like your car. And your attorney may help to retitle your real estate, or business entities.
But most attorneys won’t touch your financial accounts, nor will they contact the financial institutions on your behalf. This would include:
- Bank accounts like your checking and savings accounts
- Investment accounts
- Individual investment holdings, like paper stock certificates
Manage your assets for you
Let’s imagine that you get your assets properly retitled. Your investment accounts are in the name of your trust.
If you have investment assets, they still need to be managed. Retitling your investment account simply clarifies the ownership of the account. Someone still needs to make the investment decisions. And if needed, someone needs to be able to contact the relevant financial institutions to make important financial decisions.
If you are working with a financial planner, that person would likely be the right person to continue managing your investment assets. And to do so, you’ll want to make sure that your financial advisor is informed along the way as you retitle your accounts.
Establish your beneficiary designations
Beneficiary designations are a very important part of the estate planning process. Establishing beneficiary designations for your financial accounts allows those accounts to bypass the probate process.
But your attorney likely won’t do this for you. If you’re fortunate, your trusted advisor will help you review your beneficiary designations regularly. And when you review them, you’ll want to make sure you understand:
- How trust assets will be distributed
- Where your retirement accounts will be distributed, and what possible tax implications your beneficiaries might face
- The difference between per stirpes and per capita beneficiary designations
Your beneficiary designations should be the financial equivalent to your legal documents. In other words, your written directives to the financial institutions should reflect your intent in the same manner that your legal documents do.
Estate planning questions to consider
To make sure you get the most out of the estate planning process, you should consider the following estate planning questions before you see the estate attorney. If you’re a married couple, each of you will have to consider these questions for yourselves.
1. What happens to me if I’m incapacitated?
If you’re old enough to ask this important estate planning question, you’re old enough for something to happen to you. If you were incapacitated today, what would happen to you?
In an emergency situation, if you’re unmarried and you don’t already have a medical power of attorney, then it might be very difficult for the hospital to contact your family members to discuss health care decisions.
As you’re pondering this question, you should be thinking of how you can make sure that a health care provider can quickly identify the person whom you expect to make important medical decisions on your behalf.
2. What happens to me if I’m not expected to wake up?
These are the kinds of decisions that you might see in an advance health care directive, or living will. To put it plainly, if you were in a non responsive state, would you want to stay on life support, or would you rather have the health care facility stop life-prolonging measures?
It’s important to note that a living will is different from a health care power of attorney, in that it generally applies in end-of-life situations, as determined by state law. For example, in Florida, a living will generally applies if the patient:
- Has a terminal condition, or
- Has an end-stage condition, or
- Is in a persistent vegetative state
So the question you should ponder is what you would want to happen if you were in this condition? And you should ask your attorney what the default is-what happens if you don’t make a decision?
3. Who do I trust to make health care decisions about me if I’m not able to do so myself?
This might be easy for you, and it might be difficult.
Most married couples will have their spouse assigned to make health care decisions. But if your spouse is also not able to make decisions, whom would you trust?
Keep this in mind, as you’ll have to put it down on paper. And before you actually assign them the duty, have a conversation to make sure that person understands their expectations.
4. What assets do I have?
If you’re working with a financial advisor, this might be pretty easy. But if you have a lot of ‘stuff,’ then it might be difficult.
In either case, you should create an inventory of assets you have. Business owners should take special note to specify what assets are business assets and what might be personally owned assets.
But before you decide where your assets should go, or how the distribution of your assets should look, you need to have a good idea of what assets you have.
5. What assets need to have beneficiary designations established?
Once you’ve identified your assets, you’ll need to separate the financial assets from the non-financial assets. This is simple, but a lot of people might overlook one or two accounts, which can screw up their estate plan. Your financial accounts should include:
- Banking accounts
- Investment accounts
- Retirement accounts-this includes workplace retirement plans as well as IRAs
- Life insurance policies
When you’ve identified all of your financial assets, you’ll need to make sure you have a plan. Or at least have estate planning questions to discuss with your attorney. Some things to consider:
Retirement assets cannot be titled into a trust
Technically, you can make a trust the beneficiary of your IRA or 401k. But since the retirement account is for the benefit of a single person, it cannot be retitled. Just like it cannot be retitled to be held jointly by you and your spouse, your IRA cannot be named to your trust.
You may need to review or change beneficiaries over time
As you go through life, things might change. You might get married, divorced, or remarried. Each time, you should be thinking about you beneficiary designations to make sure the correct person is receiving the right assets.
ERISA law may trump beneficiary designations for workplace retirement accounts
This is something that happens often to people with second marriages.
According to ERISA, the law designed to protect workplace retirement benefits, the account holder may name anyone as a beneficiary. However, if anyone except the worker’s spouse is named as the beneficiary, then the spouse must sign a waiver of his or her rights to inherit those benefits.
Here’s an example. Divorced father of two has a 401(k) plan at work. He names his two children as co-beneficiaries. He gets remarried.
Question: Who is entitled to inherit the 401(k)? If you guessed the new spouse, you’re right! The children only stand to receive the 401(k) if his new wife had agreed, in writing, to forego receiving the 401k.
You may have other considerations
Do you have a family member with special needs? Do you need to do Medicaid planning with an elder law attorney? These are all things you might consider discussing in your estate planning appointment.
6. What assets might be a part of my probate estate when I pass away?
Whatever assets do not go into your trust, pass by title (as in jointly titled assets) or pass by beneficiary designation will likely become part of your probate estate.
This might include things like:
- Real estate
- Personal property, like vehicles
- Business interests
- Commodities, like gold
- Collectibles or family heirlooms
Before you decide what to do with any of these items, you should have an idea of what items you have worth considering. Just like with your financial accounts.
7. How do I want the distribution of my assets to look like?
Now that you have a better idea of what assets you have, and what might happen to them, you can spend some time thinking about how they should be distributed.
There is no right or wrong answer here. But it seems that people who don’t consider this are more likely to have assets distributed in a manner that is inconsistent with their stated wishes.
8. Whom do I trust to handle the probate process?
In other words, who is going to be your personal representative when you pass? It might be your spouse (and it should be).
But it might be a child, sibling, relative, or one of your close friends. Spend some time thinking about this, and discuss it with that person before you name them in writing.
9. Do I need to have a trust?
Here’s the million dollar question. And the answer is–it depends!
There are many millionaires who don’t need a trust because their financial situation is relatively simple. There are other people with lower net worth, but more complexity who absolutely need a trust.
Here are some considerations about whether you may or may not need a trust:
- Special needs planning
- Age-As you get older, a trust might make more sense than having someone with a power of attorney over your financial affairs.
- Having young minor children
- Having pets-Yes, there is such a thing as a pet trust
10. Whom do I want to be the successor trustee or my personal representative?
Again, this should be someone whom you trust. And this should be someone who is comfortable with the responsibility of carrying on as your successor trustee, should the need arise.
Congratulations on taking a significant big step towards getting your estate planning in order. As you go through your affairs, these questions will help you think about the options available to you. That way, you can make the best choice for your specific situation.
If you enjoyed this article, please feel free to check out our estate planning archives!
After retiring from a 24-year career as a Naval officer in 2017, Forrest became a financial planner to help people achieve success in managing their personal finances. In 2022, he sold his partnership stake in his financial planning firm to focus on helping people full-time through his writing.
Featured in: Forrest’s writing has been featured in the following publications: Forbes, Military.com, NerdWallet, Yahoo Finance, The Military Guide, The Military Wallet, Christian Science Monitor, and many other publications.
If you have questions about the content, please feel free to reach out via email.