Estate Planning

Don't Squander Your Fortune.

People either simply don’t have an estate plan, think a living trust or joint title to assets with their spouse is all they need, or think their basic will and trust is a complete estate plan. But an estate plan is much more – it must do more than just allocate assets and minimize taxes.

To make one complete, you need to establish what I call the Financial Emergency Kit. This not

only helps avoid problems, but keeps difficult times from becoming much worse.

A good estate planner focuses on the tools I’m going to mention. And the wise estate owner (like you should be) insists that they be part of the plan. These are pieces that have to be completed, even when there’s difficulty deciding on the rest of the plan.

First, make a beneficiary book. It doesn’t need to be complicated. It can be a three-ring binder. It can be a large file folder. Whatever you want. As long as it organizes your documents. The primary purpose of a beneficiary book is for the executor of your will. But it’ll also be useful if you become incapacitated somehow. And even better, putting the book together and keeping it up to date can also help you better

manage your finances.

Include recent income tax returns (both personal and business), your latest will, any trusts, all types of insurance policies, financial account statements, your personal financial statements,

loan documents, deeds, property titles and a list of the advisors you used. Be sure to record any jointly owned property and partnerships, as well as other shared properties you might have. The beneficiary book is the best gift someone can leave to heirs. It not only reduces costs, but the emotional burden, as well.

The Power of Attorney. In my mind, few things are as important in estate planning as financial power of attorney (POA). This document gives someone the legal authority to handle your finances and assets if you become disabled or are otherwise unable to manage your estate. If there’s no power of attorney, your loved ones must spend time and money to have a court appoint someone. And it might be someone you wouldn’t have selected. POAs aren’t always simple to execute. Most financial institutions accept only their own POA forms. So keep this is mind. And when thinking about financial POA, remember a cash flow plan will be a big help

to your heirs. You might have an estate that’s valuable, but has few liquid assets. That means

bills still need to be paid while your estate is being settled. So let the executor and holder of your financial POA know where your liquid assets are and where to get cash to pay bills. Again, financial institutions are likely to insist on having their own POA form completed before recognizing anyone’s authority over your accounts.

Another thing to include as part of your Financial Emergency Kit is healthcare documents. This allows someone to make medical decisions in case you become incapacitated. The simplest is the living will. It gives general instructions about which medical procedures are and aren’t to be used. Unfortunately, studies show that living wills have little effect. Often doctors don’t see them until after decisions have been made. And the instructions can sometimes be too vague to be useful in many situations.

A better document is the healthcare POA. This gives an individual or group of individuals

the right to make decisions for you. But in order for it to be effective, all of your regular doctors must have the current healthcare POA in their charts, along with information on how

to reach those granted authority. And each individual needs to have a copy.

While we’re on the subject of end-of-life issues, don’t dismiss another important part –

take the time to write your funeral and burial instructions. This eases the burden of your heirs

and gives you peace of mind. In most states, these instructions have limited legal value, but

your heirs will generally honor them.

Tying Up Loose Ends. Outside of the documents listed above, situations invariably differ case by case. So here are a couple more things to consider. If you’re an entrepreneur, your Financial

Emergency Kit should also have a business succession plan. This can involve either long-term successors or caretaker managers who run the operation until it’s sold (or at least until another long-term solution is reached). You can name a trusted key employee to keep your business running. Or you can name someone you trust outside of the company who generally knows your business well enough to oversee it temporarily. It’s up to your discretion.

But make sure your succession plan is in writing and that it’s reviewed with everyone involved. This means that your business’ bankers, creditors, suppliers and all other important

contacts should know about the plan and any role they’d have in implementing it.

Finally, another valuable document – though it has no legal effect – is a letter of instruction.

Let’s say your will places property in a trust. You might want to write a letter to the trustee stating the reasons for establishing the trust. You can include suggestions for the investment policy and the standards for making distributions. This type of instruction letter is particularly helpful if your estate has real estate, a business, or unusual items, such as collections. If you have one, take the time to pull out your estate plan and begin a thorough review. If you

don’t, this should give you a good place to start.

Excerpts from Bob Carlson, Oxford Club Advisory Panelist