Let’s get this out of the way: preparing for death doesn’t mean it will come sooner. Quite the opposite is true. Most people find preparing and completing their estate plan leads to a sense of relief. They know if and when life’s unexpected events occur, like incapacity or death, they have done what was necessary to prepare for themselves and their loved ones.
It’s a worthwhile task, says the recent article titled “Preparing for the certainties in life: death and taxes” from Cleveland Jewish News, and doesn’t need to be overwhelming. Some attorneys use questionnaires to gather information to be brought into the office for the first meeting, while others use secure online portals to collect information. Then, you and the estate planning attorney will have a friendly, candid discussion of your wishes and what decisions need to be made.
Several roles need to be filled. The executor carries out the instructions in the will. A guardian is in charge of minor children if both parents die. A person named your attorney-in-fact (or agent) in your Power of Attorney (POA) will be in charge of the business side of your life. A POA can be as broad or limited as you wish, from managing one bank account to paying household expenses to handling everything. A Health Care Proxy is used to appoint your healthcare agent to access your medical information and speak with your healthcare providers if you cannot.
You can design your estate plan to minimize probate. Probate is the process where the court reviews your will to ensure its validity, approves the person you appoint to be executor, and allows the administration of your estate to go forward.
Depending on your jurisdiction, probate can be long, costly, and stressful.
Part of estate planning is reviewing assets to see how and if you might take them out of your probate estate. This may involve creating trusts and legal entities to own property, allowing for easier distribution to heirs. Charitable donations might become part of your plan, using other types of trusts to make donations while preserving assets or creating an income stream for loved ones.
Minimizing taxes should be a part of your estate plan. While the federal estate tax exemption right now is historically high at $12.06 million per person, on January 1, 2025, it drops to $5.49 million adjusted for inflation. While 2025 may seem a long way off, if your estate plan is being done now, you might not see it again for three or five years. Planning for this lowered number makes sense.
Reviewing an estate plan should take place every three to five years to keep up with changes in the law, including the lowered estate tax. Significant events in your family also need to prompt a review—trigger events like marriage, death, birth, divorce, and the sale of a business or a home.
Reference: Cleveland Jewish News (May 13, 2022) “Preparing for the certainties in life: death and taxes.”