Do you really need an estate plan?
This is a good question to ask yourself no matter the level of wealth you’ve accumulated.
Do you have children? Do you have ownership shares in a business, or even more than one company? Do you have charitable giving goals? Do you have a plan for your family and business if you were to become disabled? Do you know who will be legally able to make decisions for you if an accident were to occur?
Here’s what an estate plan can do:
- Establish a Power of Attorney to make decisions in the event that you are unable to. This power holder can make financial decisions as well as healthcare decisions on your behalf.
- Identify a guardianship plan for your minor children. If you have any minor children, you should appoint a guardian for them in your will so they have an identified caregiver should anything happen to you.
- Ensure that your assets are generally not controlled by your will but rather, through beneficiary designations, and pass appropriately to your desired beneficiaries. Retirement plans, life insurance, annuities and certain jointly held property can all be passed directly to beneficiaries.
- Create trusts for the benefit of your beneficiaries who are younger, disabled, or others for which you may wish to provide a level of credit or protection. Identify professional management on assets you decide to allocate to those trusts. Trusts can provide for multi-generational beneficiaries.
- Assist in minimizing the probate process or otherwise making your estate more efficient.
- Help structure your philanthropic goals.
Having an estate plan can ensure fiduciaries are identified to oversee and distribute your assets in the way you would have wanted. As a business owner, your ownership assets in your estate may require a more sophisticated level of planning. Ideally a management and ownership succession plan is in place for your business now. Both should be well-documented for the benefit of your family and those fiduciaries who will follow you if you should become disabled or pass away.
Some business owners actually bi-furcate their Power of Attorney document to appoint a person or persons who are very familiar with their business as their power holder or co-power holders for decisions about the operations of the business, while family members are typically appointed as power holders for non-business decisions.
Your will or revocable trust document, depending on how your business ownership is structured, should include specific language about the post-death transfer of the business. A current buy-sell agreement can be a critical document where there are two or more owners of a business.
An important component of estate planning is regularly revisiting it. During an estate plan review, be cognizant of the following:
- Has your estate changed significantly in size to make you rethink the dispositive scheme for your assets? How will they be disposed of?
- Are the executors, trustees, Power of Attorney holders, and (if minor children are still involved) guardian named in your estate documents still appropriate?
- Have the estate tax laws changed since your last review?
- Have you changed your state of residency so that your estate documents should be revised to conform to the laws of the state in which you currently reside?
- Have your family’s dynamics changed, i.e. marriages, divorces, births, deaths, etc. such that your plan needs revision?
- Should charitable giving be part of your updated plan (if not already present)?
Were your children minors when you first put the document in place, and you named another trustee, but now they are adults and you could name them as trustees? Or perhaps your business’ leadership or structure has changed and you’d like to update the Power of Attorney for your business assets. Making sure the beneficiaries are as detailed as you would like is an important part of the puzzle.
To set up an estate plan, look for advisors who have specialized expertise in the intricacies of such a plan, including an attorney who has estate planning experience. Often, working with a financial advisor who has estate planning experience can help you evaluate a variety of estate planning options and working with an attorney and other advisors as appropriate can assist in positioning you, your family, and your business to attain your estate planning goals.
Thomas K. Williams is a Partner and CEO with Domani Wealth. He can be reached at email@example.com.