Where There's an Inheritance

Now's the time to plan your estate

Nirvi Shah

Writing a will and planning for a time when you can't care for yourself isn't a priority for as many people as it should be, financial advisors say.

And this kind of planning isn't just for the wealthy.

``When you're in your 20s, you may not have a lot of wealth,'' said Elaine King, a certified financial planner and president of the Financial Planning Association of Miami-Dade. Perhaps an accident or medical condition incapacitates you. ``Say you just got married. Who takes care of you? Your new wife or husband? Your mom or dad?''

When people talk about estate planning, they should think about far more than just a will, King said, especially now, with the federal estate tax in flux.

Everyone also needs a power of attorney and an outline of their medical wishes should they become incapacitated. Singles need to decide what will happen to any of their assets if they die. Legally, this often defaults to your closest blood relative, but that may not be the person's wish.

Parents need to decide who will take care of their children if one or both of them can't for any reason.

``Through an estate plan, you decide `This is who I want to take care of my assets. This is who I want to make medical decisions for me. This is who I want to take care of my children,' '' said Ana Harris, a Miami attorney and certified financial planner. ``Everybody has an opinion on those things -- regardless of whether they have money or not.''

And beyond that is the financial planning that is key to protecting the assets amassed over a lifetime.

``So many people work so hard to save money and invest it prudently -- only to have done no planning,'' said Adam Carlin, director of of wealth management at a unit of Morgan Stanley Smith Barney in Coral Gables. ``It could be the most expensive conversation you don't have.''

Too many people end up leaving the decisions to the court system.

``If you do the planning properly you can avoid the courts, which are underfunded and backlogged,'' Harris said. ``Why let things drag on and on and on for your heirs? That's the whole point of putting a good plan in place.''

These are some of the things you may want to consider when developing your estate plans:

POWER OF ATTORNEY: This term can apply to two separate tasks. It can give someone authority over part or all of your finances should you become unable to. It also provides for someone to make medical decisions on your behalf if necessary.

``If you don't name anybody to take charge of them, your property or assets can be lost or abused,'' King said.

These documents should be drafted by an attorney, King said. Typically separate powers of attorney are draw up for financial and medical responsibilities.

``The best person to give this authority to is someone you trust, who is emotionally and financially stable and who has the power to be objective and have your best in mind,'' she said.

MEDICAL CARE: In addition to a medical power of attorney, you may consider a living will and whether you want a do-not-resuscitate order. Talk to your doctor and an attorney about whether these are appropriate for you.

A living will or healthcare directive outlines what kind of care someone wants in case they can't voice those wishes because of an illness, King said.

``This does not allow someone else to make decisions for you, since you already specified what you do and don't want, things like tube feeding,'' she said.

A durable power of attorney for healthcare gives the decision-making power to someone else.

And a do-not-resuscitate order tells physicians whether you want them to perform CPR if your heart stops or you stop breathing. It must be signed by a physician.

A CLEAR, DETAILED WILL: ``We think we're going to live forever,'' said attorney Les Kotzer, author of two books based on his experience as a wills attorney.

The latest, Where There's An Inheritance, includes a number of stories about what happens when wills are done right, poorly and not at all.

One of the most important points he makes is to talk to your children about what you intend on leaving them in the will -- and why. After you're gone, a child may not understand your decision-making process.

In one case, a mother left 5 percent of her estate to one child and the rest to another -- with no explanation -- instead of specifying items or dollar values. The child left the smaller percentage demanded a detailed accounting of everything in the estate. The children told Kotzer they now hate each other.

In another case, a father told one of his children he wanted her to have the family piano but didn't say so in the will. Another child sold it when the father died, intending to split the money with the other siblings along with the rest of the estate. The daughter who was promised the instrument sued her brother.

``If you want to leave something to your kids, specify it,'' he said.

It's important to keep a will updated, Kotzer said. At the time you created your will, you may have specified an uncle who was 50 to be the executor. Because years may pass before you die, your uncle might be too old -- or dead himself -- before th person you specified takes that responsibility.

TRUSTS: These aren't just for the wealthy, Harris said, whatever their reputation.

Trusts, fundamentally, are a place to put assets during your life and upon death, someone will be in charge of determining what happens to them.

``The whole point of a trust is that you trust the person who's going to be making that decision,'' Harris said. ``You can't anticipate everything that's going to happen.''

The person or institution you put in charge of the trust is not being given an honor, Harris said. It doesn't have to be a relative.

``Having an independent person is sometimes better. Then you're not pinning one sibling against another,'' she said. ``It's a duty. It's a big responsibility.''

While establishing a trust can start at a few thousand dollars, Harris reasons that not having one, even if what someone plans to leave behind is modest, can mean an estate will wind up in court.

``You may be paying a little bit more up front than you would for just a will,'' Harris said, ``but you'll be saving a lot compared to going through probate.'' In addition, trusts are untouchable by creditors, she said, and for young children or children who can't care for themselves, they are a form of protection.

``When a parent establishes a trust for a child that's one of the best things they can do,'' she said.

Another benefit of trusts: assets they hold grow outside of an estate.

For example, Carlin said, in a grantor-retained annuity trust, or GRAT, a person would put an investment inside the trust, and take back the principle investment.

``If an asset earns more than what is paid back, whatever it earns remains in the trust,'' he said.


Copyright © Continental Atlantic Publications