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Estate Planning

No one, regardless of their age, wants to think about disability or death.  However, proper estate planning is one of the most important steps you can take to protect you and your family.  A well-crafted estate plan can spare your loved ones time, expense, and emotional upheaval by providing support for your loved ones, minimizing delays, minimizing estate taxes (if applicable) and if you desire, avoiding probate to the fullest extent possible.

What is Estate Planning

Many think of estate planning as simply tax planning to reduce estate taxes, and prior to 2011, estate tax planning was an extraordinarily important part of the estate planning process.  However, as a result of legislation that became effective 1/1/11, estate tax planning became much less important. 

As of 1/1/11, the estate tax exemption was raised to $5,000,000 per person and it has increased every year thereafter.  During 2017, the estate tax exemption was $5,490,000, and in 2018, the exemption will be $5,600,000 per person. 

Estate tax planning continues to be an integral part of the estate planning process if your estate exceeds $5,600,000, but otherwise, estate tax planning is not nearly as important as it was 20 years ago when the estate tax exemption was $600,000.  As a result, the primary focus of estate planning today is on the disposition of your assets, rather estate tax planning.

Planning for Disposition of Your Assets

NDHA can develop plans to dispose of your assets during your lifetime or at death from among various alternatives, including the following:   

  • Assets can be disposed of by will.   The will can dispose of the assets directly to the beneficiaries or the will can provide for the formation of testamentary trusts (i.e., the formation of trusts upon the death of the person making the will) for the benefit of the beneficiaries.  If you leave the estate to your loved ones using a will, everything you own will pass through probate.
  • Assets can be placed into a revocable trust.  Revocable trusts are used to avoid probate (and some of problems associated with probate described above), maintain privacy and provide asset management when the person forming the trust may become disabled in the near future.  They provide no income or estate tax benefits.
  • Assets can be placed into an irrevocable trust.  A gift occurs whenever assets are transferred to an irrevocable trust, but the assets will not be included in the gross estate of the person who formed the trust upon his or her death.  Frequently, insurance policies are transferred to an irrevocable trust and the irrevocable trust will be named as the owner and beneficiary of the policy to remove the policy proceeds from the gross estate of the insured.   
  • Irrevocable trusts can be formed for charitable purposes, such as a charitable remainder trust or a charitable lead trust. 

​Providing for Minor Children

 If you have minor children, your estate plan must address who will care for you minor children and who will provide the financial support for your minor children.

You should give careful thought to your choice of a guardian for your children.  The guardian is the person who will be caring for and raising your children.  Thus, it is extremely important that the guardian shares your values and has the necessary child-rearing skills.

In regard to who will provide the financial support for your children, you have two choices.  A guardian can be appointed to handle the financial affairs or a trust can be established for the benefit of your minor children.

In most cases, the creation of a trust for the benefit of the minor children is preferable.  By using a trust, the age or ages at which the assets will be released to the children can be specified.  This allows the children to become more mature and less likely to use the funds imprudently.

If, however, the parents of the children are still married or are still in a relationship and both are financially stable, one might consider having the surviving parent manage the assets as guardian of the assets, as well as guardian of the children. 

Other Estate Planning Issues

Estate planning requires the consideration of a number of other issues, including:

  • Who will handle your financial affairs in the event you become disabled?
  • Who will make medical decisions for you in the event you are not able to do so?
  • Do you want to be placed on life-support if you become terminally ill? 

​Durable Power of Attorney

If you become disabled, no one has the authority to handle your financial affairs until you have been declared incompetent and a guardian has been appointed for you and your estate.  Guardianship proceedings are lengthy, costly and extremely stressful for the family.  You can avoid these problems by executing a durable power of attorney and appointing a person (and successor(s)) who will have the authority to handle your financial affairs if you become disabled.

Medical Power of Attorney

Also, if you become disabled, you won't be able to make medical decisions for yourself.  You can execute a medical power of attorney and, thereby, grant the authority to someone (and successor(s)) to make medical decisions on your behalf in the event you are unable to do so.

​Directive to Physicians (Living Will)

​In a directive to physicians (more commonly known as a living will), you state that you do not wish to be placed on life-support in the event that you have been diagnosed as being terminally ill.  This document is important for two reasons.  If you are unable to make a medical decision for yourself, the person named by you in your medical power of attorney to make medical decisions for you is relieved of the burden of having to make the decision of whether or not to place you on life-support.  You have already expressed your desire.  Second, while the person named in your medical power of attorney has the authority to make this decision, medical providers may not be willing to follow that decision unless you have expressed your wishes by having executed a directive to physicians (living will).

Summary

NDHA can review your family and financial situation, your goals and explain the various options available to you and develop an estate plan for you.  With your estate plan in place, you will have peace of mind knowing that you have provided for yourself and your family.  Call 972-934-2830 or contact the firm online today.



© 2018 N. Dean Hawkins & Associates, Inc. | Disclaimer
12801 N. Central Expressway, Suite 540, Dallas, TX 75243
| Phone: 972.934.2830

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