Brown & Associates - Attorneys & Counselors at Law, P.L.L.C.

ESTATE PLANNING-IT'S NOT JUST ABOUT MONEY
(2/16/03)

There is a great deal of confusion over what is going on with the Federal estate tax. In 2001, Congress rewrote the rules. For now, there is a gradual reduction in the estate tax until 2010, when it completely repealed-for one year. Then in 2011, the Federal estate tax is reinstated as it was prior to the 2001 tax change. For those of you with potentially taxable estates, this has made your estate planning more complicated than it was in the past.

Many of you with whom I have talked question whether you even need to worry about estate planning if the estate tax is going away. Others of you have told me you are going to wait until you know what the final rules say before you do anything. Let me try to bring some sanity to this insane situation and help you sort out why and what you should be doing during this uncertain time.

Not Just For Wealthy

It isn't just the rich and powerful who need an estate or financial plan. Many of you are comfortable managing your own affairs and have everything you need in place to handle any situation, even if you become disabled. Others of you, however, aren't comfortable with financial matters and could benefit from the advice of professional advisors. Regardless of which camp you find yourself in, the key is to make decisions now while you are still able to take the necessary action, rather than waiting until the last minute when you may not be able to act or to act quickly enough, or you find yourself pressured to make a decision without having all the facts.

Know Where You Stand

I am surprised how much some people know about their affairs and how little others understand their financial situation. I have clients in their 80s and 90s who can list their accounts by number and balance, provide the full legal descriptions for their homes and ranches, and tell me when they acquired what and how much it is worth. These same people can usually give me the full names, birth dates and addresses of each of their heirs and tell me who is to receive what.

On the other hand, I've had clients who had absolutely no idea what they own, what it is worth, who they want to oversee it, or to whom they want to leave it.

You should begin by preparing an accurate net worth summary. Identify all accounts and other assets and provide an estimated current value for each. List your creditors and the amounts owed. List your insurance policies and to whom the proceeds will be paid. Until you know what you own, it is hard to decide how the assets should be managed during your lifetime or distributed after your death.

After you have an accurate net worth summary, decide whether you are comfortable with your current estate plan or if you need professional assistance to sort through your options.

Incapacitation

What happens if you become incapacitated and cannot manage your own affairs? This might be due to unforseen accident or illness or because of a progressive illness or onset of dementia. If you become incapacitated, you can't manage your affairs and may not be able to make sure your wishes are known or carried out. Do you have a trusted family member, friend or advisor whom you have appointed to act on your behalf if this occurs? Does he or she know what you want done?

If you have made financial decisions, you need someone to be able to carry them out for you. This requires the appointment of an agent under a power of attorney or designation of a trustee under a revocable trust agreement. And once you have appointed someone to act on your behalf, communicate what you want done. They can't do what they don't know about.

What if you require hospitalization? Who can sign you into the hospital and authorize care? If your situation worsens significantly, do you want the physicians to take extraordinary measures or just provide whatever is necessary to ease your pain? Do you have an Advance Directive for Health Care that authorizes your doctor to discontinue care and a health care proxy to make decisions for you?

Management of Affairs

As I said in the title, estate and financial planning isn't always about money. The most important purposes are to enable you to manage and maintain control of your assets and to preserve your dignity. Estate planning is more than just executing documents. If you haven't given someone a Power of Attorney to handle your finances and you become unable to take care of your own affairs, someone (perhaps not the person you would have chosen) will have to petition the court to be appointed as your guardian or conservator. This is an expensive procedure and because it requires ongoing court oversight, is overly burdensome to manage.

There are other things which are equally as important. Effective planning includes such simple things as looking at your home and seeing if it meets your needs. It you are physically restricted and can only get around with a wheelchair, have you done what you can to make your life easier? Do you have a ramp to your front door? Have you widened the door to make wheelchair access easier? What about rails around the bath tub to make it easier to get in and out? If your bedroom is upstairs, have you considered relocating to a room downstairs or installing a wheel chair lift to make it easier to get up and down?

You might not need to take all these actions now, but will you want or need to at a later time? In other words, while you can get around just fine now, do you have a progressively worsening condition that may require these changes to be made sometime down the road? I don't know about you, but I want to be the one making these decisions and not leave them to anyone else.

Can you still safely operate a vehicle? Children have told me of parents getting lost within a block of their own home or of driving their car on the center line because they can't keep it in one lane or the other. Be honest with yourself. Is your driving hazardous to yourself or others? What are you going to do about it? Sell your car and rely on public transportation and family and friends to get you around? Hire someone to drive your car for you?

Maybe you can find your way around okay, but cannot act quickly in an emergency or don't recognize mechanical problems, such as an overheating radiator or a flat tire. A service station attendant told me about a customer who drove into his station with two tires completely shredded and the rims badly dented. When asked what happened, the driver wasn't aware anything was wrong. If you are not fully cognitive of what is happening around you, the driver's seat of an automobile is the last place you should be.

Next week, I'll talk about some related issues, such as quality of life.

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