Financial Planning 101

Paulette Pasquale:
Important Questions in Estate Planning

June 8, 2018
Important Questions in Estate Planning

Most people understand that estate planning determines who will inherit your assets and how. But establishing that plan requires answering some tough questions.

How will you preserve your assets from estate taxes and probate fees? How will you ensure distribution of your assets according to your wishes?

Who will make financial and medical decisions in the event of your incapacity?

Honest and frank conversations with a financial planner are necessary to have these questions answered in advance.

As part of our Financial Planning 101 series, Paulette Pasquale, a certified financial planner with W3 Wealth Management, offers some insight into some common questions.

Isn’t estate planning only for “old” people?

Paulette Pasquale: No – it is for everyone of legal age. If you have children and/or own property, having the legal documents in place are critical in the event of a premature death. And remember, accidents or sudden medical emergencies can happen to anyone at any time.

So it is important that you do not put off creating these living documents.

And it’s not a “one and done” kind of thing. You should review your estate plans regularly; about every five years or when any major life events occur, such as weddings, birth of children or grandchildren, death, divorce, receiving a large inheritance or windfall.

What tools can I use to pass my assets to my heirs upon my death?

Pasquale: There are different tools based on your situation and your goals. It is important to work with a qualified estate planning attorney to determine which documents are needed to achieve your estate planning goals and ensure that they are properly prepared.

A will is a written set of instructions that spells out whom you would like to inherit your assets and how. Wills include whom you’ve appointed to be your personal representative, or executor, of your estate. You can also name a guardian for any minor children and their estates. Otherwise the court will determine who cares for your children and their finances. Any assets distributed through your will are subject to probate and a matter of public record, leaving your heirs with little or no privacy.

In the event you become incapacitated, or have beneficiaries who aren’t able to manage their own financial affairs, such as minor children or people with special needs, establishing a trust can be very effective.

A trust is a legal arrangement under which one party, the trustee, manages assets during your lifetime and/or after your death. Assets are distributed according to the terms of the trust without the time, cost and publicity of probate. There are some costs, however, and they aren’t always necessary.

Jointly owned assets pass to surviving co-owner(s) automatically by “operations of law,” so there is no need for probate. Be sure to consider how you hold title to all of your property, including real estate, investments and savings accounts, since jointly owned assets transfer ownership outside of the will.

Beneficiaries designated in your employer-sponsored retirement plan, IRA, life insurance or annuity contract automatically receive the proceeds to those accounts. So again, there is no need for probate. You can also establish transfer-on- death instructions on your investment or bank accounts as well as real property. Like joint ownership, your property will be passed upon your death, but without granting any ownership rights to the beneficiary before your death.

Be sure to review and coordinate your property and accounts so your beneficiary designations reflect your current wishes. An important thing to keep in mind is that your will applies only to assets that pass through probate and will not apply to any accounts with designated beneficiaries.

What if I cannot handle my financial affairs during my lifetime?

Pasquale: Becoming incapacitated can happen to anyone at any age following an accident, stroke or other event. So it’s important to establish someone to make decisions for you it you are unable to do so.

The instructions in your estate planning documents have a far-reaching impact on you and your family. It is much better for you to make these critical decisions now than to rely on the courts to make them. You will also be making things easier for your family when they are dealing with so many other losses.

Designating a general power of attorney for finances legally authorizes someone to make legal and financial decisions on your behalf. Without this document, the court will approve such decisions through a conservatorship.

This can be a very powerful document, so you need to be sure that a qualified attorney, detailing the specific rights given to the attorney-in-fact, properly drafts it. The power must be durable to remain valid in the event of either mental or physical disability. As the grantor of the power, you must have full trust and confidence your agent will act in your best interests.

Advanced directives are written documents communicating your health-care wishes to doctors and other health care professionals when you cannot speak for yourself. These directives include health-care power of attorney, which designates whom you wish to make health-care decisions on your behalf when you are unable.

The document also designates who can access your medical information to make informed decisions and becomes effective only when you’re not able to make your own decisions regarding treatment.

The living will is the second part of advanced directives and states your wishes concerning the use of life-sustaining treatment should you become terminally ill or permanently unconscious. It becomes effective only when you cannot communicate your wishes.

Should I discuss my estate planning with my family?

Pasquale: Discussing your estate plans and your wishes openly with your loved ones is one of the best gifts you can give them and to yourself. Knowing that you have thought ahead and provided this guidance for them will provide peace of mind.

You may also wish to ask if they are willing to act on your behalf, either as executor or attorney-in-fact for your powers of attorney. If you have minor or children with special needs, you will certainly want to know that the people you would like to name as guardians are willing and able to take on that responsibility.

We also encourage open conversations between parents and their adult children. There will likely come a time in everyone’s life where he may need the help of someone else to manage his affairs.

This is a very difficult pill to swallow and most of us resist asking for help or giving up control for as long as possible. Some of us never do so willingly. It is much easier to handle these situations if there have been ongoing conversations with those who may need to help us in the future.

In doing so, we have the opportunity to express our fears and concerns, as well as the opportunity to become comfortable that we will be treated with respect and consideration for our wishes. 

The opinions are those of the author and should not be construed as investment advice. All information is believed to be from reliable sources. No representation is made to its completeness or accuracy. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Fee-Based Planning offered through W3 Wealth Advisers LLC – a state registered investment advisor. Third-party money management offered through Valmark Advisers Inc., a registered investment adviser. Securities offered through Valmark Securities Inc. W3 Wealth Management and W3 Wealth Advisors are separate entities from Valmark Securities and Valmark Advisers.

Published by The Business Journal, Youngstown, Ohio.