ESTATE PLANNING – A TOUGH BUT IMPORTANT CONVERSATION
Speaking with your loved ones about estate planning or end of life planning is never easy; no one wants to think about the day that their loved one is no longer around or think about what can happen if a loved one is not able to communicate their wishes to you. As with most difficult situations, communication is key and can alleviate some of the stress from the situation. Even though discussing estate planning and end of life planning won’t be the most fun dinner topic, the holidays present a great opportunity to have those difficult conversations. A relatively short conversation about your plan can save stress on your loved ones and thousands of dollars when those situations arise. To help guide that conversation, it is important to understand the components of an estate plan. A general estate plan is composed of three main components, each of which serve different but important roles.
The first component of an estate plan is made up of either a Will, a Trust, or a combination of the two. These documents, or a combination of them, establish who will inherit your assets when you are gone and in what proportions. A Will also defines who will act as your Personal Representative. A Personal Representative is tasked with overseeing the administration of your estate and is the point person if a probate is required for your estate. The Personal Representative will ensure that your assets are distributed in the manner that you have established in your Will or Trust and that everything done in connection with your estate is done in accordance with Minnesota law.
Without a Will or Trust, your assets will be distributed according to a priority list established by Minnesota law upon your passing. This may force assets to go to individuals who you do not wish, and without a Will or Trust, this cannot be avoided. A Will or a Trust, along with other documents, also help to prevent the need for the probate process. Probate is a State overseen process that ensures that your estate assets are distributed in accordance with your Will or Trust. This process is time consuming and expensive but can be avoided in most scenarios with a proper estate plan.
The second component of an estate plan is the Power of Attorney. A Power of Attorney document establishes an Attorney-in-Fact who has the authority to make financial decisions on your behalf while you are still living. The Attorney-in-Fact’s powers can be limited to certain time frames or for certain transactions, or a Power of Attorney can grant broad powers to the Attorney in Fact. When broad powers are given, a Power of Attorney allows the Attorney in Fact to sign real estate documents on your behalf, access your bank accounts, sign checks, and conduct any financial business on your behalf that you could do yourself. Because of that, who you choose to nominate as your Attorney in Fact and informing them of their role and responsibilities is vitally important. The Attorney in Fact plays an important role by allowing someone to conduct business on your behalf while you are not able to yourself, whether that is because of a health emergency or other reason. Explaining the role of Attorney in Fact to whomever you plan to have fill that role will help them act when the time comes.
The third component of an estate plan is the Health Care Directive. A Health Care Directive appoints someone as a Health Care Agent for you. A Health Care Agent can make health care decisions for you in the event that you cannot make them yourself. This circumstance could arise because of mental incapacity, being unconscious because of an accident or other traumatic occurrence, or it could simply arise during a routine surgery where something has gone wrong, and anesthesia prevents you from being able to articulate your choices.
The Health Care Directive also gives you a chance to enumerate your stance on different health care treatments. Hospital workers and first responders routinely tell us that Health Care Directives are sought after when decisions need to be made for someone unable to respond and in need of urgent attention. Because of the high stress nature some of these decisions may involve, having a conversation with your agent to inform them of your wishes can ease the agents mind, and allow them to make the decision that you want with confidence.
Estate plans can take on many different forms, but these three main components remain constant. Whether you are the person placing a friend or family member in a decision-making role, or you are the friend or family member tasked with acting in the decision-making role, communication will make either role easier, and there is no better time for that conversation than now.
As you partake in traditions with your family this holiday season, think about starting the conversation of how to best protect your family and your assets with an estate plan. If you or your family are ready to start or continue these conversations, call the estate planning team at Blethen Berens.