Estate and Probate

In life, two things are certain: death and taxes. These are the reasons that you need estate planning.

Three important components of a thoughtful estate plan are:

1. A durable power of attorney, so that someone can handle your financial and economic affairs if you cannot do so.

2. A health care power of attorney, so that someone can make the medical decisions you would make for yourself, in the event you are not able to do so.

3. A will or trust which leaves the things you have accumulated in your lifetime to the persons whom you want to get them - fairly, efficiently and effectively.

As you mature in life, your estate planning needs change. We feel that you should review your estate plan (that is your will or trust) every three to five years. You may not want to change it, but you should at least think about.

So you can appreciate this process, let's review the following scenarios regarding the needs of a typical married couple over that couple's lifetime. Those scenarios might be as follows:

1. In your twenties: you are married with two young children. You have a house with little equity, a little bit of savings and a lot of life insurance. Your retirement funds are small. In this circumstance, you may want a will that establishes a trust for your young children, in the event both parents are not around. There likely will be no need for tax planning, and the most important decisions will be the decisions about who is to be the guardian of your children and the trustee of the trust funds established by the proceeds from your insurance policies.

2. In your thirties: your children are now teenagers or pre-teenagers, your house now has some equity in it, you have a little bit more life insurance (because you understand you're going to have to provide for your children's college education), you have a few assets that you've accumulated and your retirement plan has a little bit more money in it. At this point in time, you will need to consider whether your guardians and trustees (who may formerly have been your parents) are still the appropriate choices. You'll have to consider whether your estate (which includes your insurance proceeds) exceeds the taxable limit (which today is $1,300,000 for a couple) and whether your assets are held in a manner that takes full advantage of your ability to pass on your assets to your children tax free. At this point in time, you will probably still need a trust, but you may need some simple tax planning.

3. In your forties: your children are either in or just out of college. You may or may not be grandparents. The value of your house, your retirement funds and your insurance have all increased. You need to consider whether or not you still want a trust for your children (have they demonstrated financial sensibility, are they in a good stable relationship, etc.) At this point, you may well want to do away with the trust; and you may want to consider naming your children as alternate executors of your will, perhaps trustee or guardian for younger children. You have now had an adequate opportunity to observe your children over time, and you are probably able to make some specific decisions about how you want to leave your money. Also, you may have accumulated some assets that you want to leave to specific people. At this point in time, if you haven't spent too much money on your children's education, you may have some more serious tax planning issues to address.

4. In your fifties: your children are ensconced in some sort of a career. You may have grandchildren. Maybe you've paid off your house mortgage (again unless you've got those education loans still on the books). It's likely that your retirement funds are considerably more substantial. Your insurance picture needs to be reviewed again. Assuming no divorces (by either you or your children), you are probably at a point where you are thinking about your own retirement. If there are grandchildren that need to be protected, you may be thinking about a trust for the grandchildren. You also may be considering how to best plan for your own retirement. You may be thinking about how to equitably pass on your business or some other non-cash assets.

I'm not going to go any further, because most of us are immortal anyway. However, we hope this scenariolization gives you some pause to think about your estate plan and why it's important that you review it every so often.

At Borofsky, Amodeo-Vickery & Bandazian, we are fully prepared to help you with your estate planning and other probate needs. Although we can do living trusts, we are not convinced that they are the solution for every problem.

If you have some concerns about your estate plan, please don't hesitate to give us a call.