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Estate Planning

Estate Planning

While nobody wants to think about death or disability, establishing an estate plan is one of the most important steps you can take to protect yourself and your loved ones.  Proper estate planning not only puts you in charge of your finances, it can also spare your loved ones of the expense, delay and frustration associated with managing your affairs when you pass away or become disabled. 

Providing for Incapacity

If you become incapacitated, you may not be able to manage your own financial affairs.  Many are under the mistaken impression that their spouse or adult children can automatically take over for them in case they become incapacitated.  The truth is that in order for others to be able to manage your finances, they must petition a court to declare you legally incompetent.  This process can be lengthy, costly and stressful.  Even if the court appoints the person you would have chosen, they may have to come back to the court every year and show how they are spending and investing each and every penny.  If you want your family to be able to immediately take over for you, you must designate a person or persons that you trust in a proper legal document so that they will have the authority to withdraw money from your accounts, pay bills, take distributions from your IRAs, sell stocks, and refinance your home.  This document is known as a Durable Power of Attorney.

In addition to planning for the financial aspect of your affairs during incapacity, you should establish a plan for your medical care.  The law allows you to appoint someone you trust - for example, a family member or close friend to make decisions on your behalf about medical treatment options if you lose the ability to decide for yourself.  You can do this by creating an Advance Health Care Directive where you designate the person to make such decisions and outlining some of your medical preferences.  In addition to an Advance Directive, you should also consider signing a Authorization to Release Medical Information, so that loved ones may have access to your medical information.

Avoiding Probate

if you intend to leave your estate to your loved ones using a will, everything you own will pass through probate.  This Court process is public and can be expensive and time-consuming.  Many individuals choose to avoid probate, opting for a more private and efficient settlement of their estates.  The primary vehicle used to avoid probate is a revocable living trust.

Providing for Minor Children

It is important that your estate plan address issues regarding the upbringing of your children and the management of their inheritance.  Your plan should nominate a guardian to raise your children until age 18 and designate a trustee to manage the finances until a certain age.   All too often, children receive substantial assets before they are mature enough to handle them properly, so it is wise to consider an age beyond 18.

The individuals you select as guardian and trustee need not be the same person.  In fact, in many situations, you may want to purposely designate different persons to maintain a system of checks and balances.  Otherwise, the decision as to who will manage your finances and raise your children will be left to a court of law. 

You should give careful thought to your choice of guardian, ensuring that he or she shares the values you want instilled in your children. You will also want to give consideration to the age and financial condition of a potential guardian. Some guardians may lack child-rearing skills you feel are necessary.  Make sure that your plan does not create an additional financial burden for the guardian.

Planning for Death Taxes

No matter how overtaxed you think you are during life, Uncle Sam will want to review your estate at death to ensure you don’t owe him that one final tax: the federal estate tax.  Whether there will be any tax to pay depends on the size of your estate and how your estate plan works.  The federal estate tax for 2017 is 40% on estates in excess of $5,490,000.  Many states have their own separate estate and inheritance taxes.  Vermont currently has its own estate tax, which is imposed on estates valued above $2,750,000.  There are many well-established strategies that can be implemented to reduce or eliminate death taxes, but you must start the planning process early in order to implement many of these plans.

Charitable Bequests – Planned Giving

Do you want to benefit a charitable organization or cause?  Your estate plan can provide for such organizations in a variety of ways, either during your lifetime or at your death.  Depending on how your planned giving plan is set up, it may also let you receive a stream of income for life, earn higher investment yield, or reduce your capital gains or estate taxes.

A well-crafted estate plan should provide for your loved ones in an effective and efficient manner by avoiding guardianship during your lifetime, probate at death, estate taxes and unnecessary delays.  You should consult a qualified estate planning attorney to review your family and financial situation, your goals and explain the various options available to you.   Once your estate plan is in place, you will have peace of mind knowing that you have provided for yourself and your family in case the worst happens. 




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