Estate Planning for many people, is something done all at once, if at all. It is often done over the course of a few hours, at an attorney’s office (or the kitchen table) and once it is all signed, it is put away and not worried about until someone frantically searches for it when a death occurs.
The truth is — the best estate plans are done over years and done incrementally based on life events which trigger needs. The four main life events which trigger needs in estate planning are:
- Graduation from high school/turning 18/going to college
- Buying a house
- Marriage/divorce
- Having children/grandchildren
These events dramatically change your life in ways many don’t think about. Each, without proper planning can adversely affect your estate, or the estate of those you love.
Graduation from High School/Turning 18/Going to College
This is an early milestone to people, it is the accomplishing of an important level of education, the exact moment someone officially becomes an adult, or the beginning of a new and more independent chapter in one’s life. This is an exciting time full of possibilities about what lies ahead. It can also be a time filled with stress. It is also a time when thinking like an adult becomes more important.
Current Health Care laws, known as Health Insurance Portability and Accountability Act (HIPAA) prohibit medical persons from sharing the health care information of their patients, even with the parents of the patients. There are some exceptions, of course. Health care providers CAN share the information with people
- Who are involved in the patient’s health care, or who pay for the patient’s health care
- If the patients says it’s okay to share it
- If the patient does not object to the sharing
- If, using professional judgment, the health care professional believes the patient does not object
However, the health care provider is not REQUIRED to share information with anyone but the patient or their personal representative.
A parent, who can demonstrate to the doctor or agency that they are involved in their child’s health care — easily done if the child is under 18 (but at the age of 18 it is presumed that the child is making health care decision on their own, with no parental involvement) or by demonstrating that the parent is paying for the health care coverage of the child, may be utilized by the doctor as a representative. But even if a parent can demonstrate involvement, the doctor is still under no obligation to share information. To make matters worse, demonstrating involvement or payment can be very tricky and take time, especially when a child is away at college or otherwise moved out of the house.
Things happen in early adult years, either due to stupidity or sheer accident, which can put a person in the hospital, and if the patient cannot give consent or does not have the ability to appoint a representative, how can parents maintain involvement in the health care decision making for their child during the time of transition into full-fledged adulthood? The best way is to become the representative of the adult child. A very simple Power of Attorney for Healthcare can be used in case of an emergency and allow a parent, relative, or friend to step in as the representative to speak on the behalf of the patient when they cannot speak for themselves. It can be one of the best gifts you give your high school graduate/18 year old/college freshman.
Power of Attorney for Healthcare is the first and probably the easiest part of estate planning. Many people don’t think of healthcare when they think of estate planning because most people think of estate planning as something that only matters when they die, but the fact is, estate planning is about planning, preparing, and protecting while you are alive also. Many states have different requirements when it comes to Power of Attorney for Healthcare so be sure to check specific state requirements, or deal with an attorney who is aware of the differences when setting up this simple yet vital part of your estate plan.
Buying a House
Once you enlarge your estate with the purchase of a house everything about your estate becomes more complex. You now own real estate. You now have an estate which is likely above the $100,000 maximum allowed to file what is known as a “small estate affidavit” for estates of less than $100,000. A small estate affidavit is a way to avoid probate on small estates. One common question is about mortgage. Can a home be placed into a will or trust if there is a mortgage? Yes. If I still owe $250,000 on my home and only have $80,000 in equity on my home, can my heirs still file a small estate affidavit? Probably not, and that all depends on the actual value of your home, not the amount of equity you have built up so far.
Buying a house is an exciting time full of possibilities about what lies ahead. It can also be a time filled with stress. It is also a time when thinking like an adult becomes more important. Suddenly there is a mortgage, and property taxes, and homeowners insurance, and repairs, and lawn care, and seemingly a million other things to think about and deal with. More important, now that your estate has become exponentially larger, more thought needs to go into how to manage your estate now and in the future.
Creating a Will or creating a Living Revocable Trust and putting your house into the trust, or naming in your will who will own your house (the largest chunk of your estate) should you die, will save your estate money and time. Which one you choose, a Will or a Living Revocable Trust is up to you and can depend on many factors. This decision is best made when speaking with an attorney who can explain the differences between the two different instruments and help you determine which will work best for you and your estate plan moving forward.
If you haven’t done so already, now would be the time to create your Power of Attorney for Property. This is similar to the Power of Attorney for Healthcare which was created to allow someone to step in as your representative regarding health care decisions when you cannot make the decisions yourself, and allows someone to step in as your representative regarding your property when you cannot. If for some reason you become incapacitated due to accident or illness, someone can still deposit money into your accounts for you and can write checks to pay the mortgage, and taxes for you.
Marriage/Divorce
The decision to get married (or divorced) will likely dramatically change the size of your estate and in either case the complexity of your estate will grow, second possibly only to when buying your first house. For simplification purposes we will deal with marriage, however in the case of divorce, just think of doing the opposite.
Now that you are married, you will be joining your assets with your spouse. These assets likely include: your savings account, your checking account, your home and all of its furnishings. You and your spouse will depend on each other for support and comfort and rely upon each other in good times and in bad times. Having a significant other also means that it is time to update or create your estate planning.
Many people who have company offered Individual Retirement Arrangements (IRA’s), company offered Stock options, company offered life insurance, etc. don’t realize that they have already done estate planning. With each offering there is a place to add “beneficiary information”. These beneficiaries are the people who will receive a payout of cash in the event of death while your hold these accounts in your name. Prior to marriage there are plenty of options to have as beneficiaries; parents, siblings, charities. Once you are married, the responsible thing, at least initially, is to name your spouse as your beneficiary.
By the time they get married, most people have not yet even thought about setting up an estate plan. Being with friends, having fun, and enjoying the local bar or club scene is typical for the unmarried single person. While marriage does not end that, it does put things into perspective. Marriage is an exciting time full of possibilities about what lies ahead. It can also be a time filled with stress. It is also a time when thinking like an adult becomes more important. This is an excellent time to create your Will or Living Revocable Trust and your Power of Attorney for Healthcare and Power of Attorney for Property.
Sitting down with your spouse and discussing, with an attorney, the “what if’s” in life, helps, in its own way, to bring the two of you together to where you realize that you really are a Team. A good attorney will also help to remind you to change the beneficiary status on all of those work offered IRA’s and other benefits.
Having Children/Grandchildren
When children and grandchildren come into your life, you realize (or remember) that it’s not all about you anymore. There are others who need to have their priorities put first. These little people will rely on you from now until they die. They will rely on you for advice, shelter, clothing, food, education, and everything else.
Having a child is an exciting time full of possibilities about what lies ahead. It can also be a time filled with stress. It is also a time when thinking like an adult becomes more important. You know you trust your spouse to care for your child when you are not there, but whom do you trust when you both are not there? This isn’t about the babysitter on date night (and I highly encourage a lot of those), but rather what if something horrible should happen? Who will care for your child? Whom do you want the court to appoint to care for your child? That is where a Standby Guardianship comes into play. This is a tool which can be used by parents of minor children to petition the court in order to allow a person whom they know, and of their choosing to care for their children when they can no longer do so. When you add the Standby Guardianship to your Will or Living Revocable Trust and the Power of Attorney for Healthcare and the Power of Attorney for Property, you are beginning to lay the foundation your estate.
