Estate planning covers a wide range of subjects that all come under the heading of “Estate Planning.” Estate planning generally, is simply ordering your estate so that it can be handled in your incapacity or upon your death by people that you trust for the benefit of yourself and your loved ones who come after you. Your estate plan is your parting gift to the people you love, and a well-ordered estate plan is a precious gift indeed.
Most people think of Wills when they think of estate planning, but estate planning is much more than simply doing a Will. A Will only relates to property that is “subject to probate.” Most people have property that is subject to probate, but not all property that you own is subject to probate. For instance, property in joint tenancy and property that has beneficiary designations who survive you are property that is not subject to probate. We put these devices into the category of miscellaneous estate planning tools.
Most estate planning is driven primarily by a Will or primarily by a Trust. Trusts are very useful estate planning tools that give you maximum control and provide maximum benefits for your estate, making estate administration after you pass much simpler than estate planning that is driven primarily by a Will. Trusts can be created in Wills, or Trusts can be created as stand-alone documents. Learning about the benefits and uses of Trusts is a key component of estate planning.
If you are fortunate enough to have a large estate, Trusts are used for estate tax planning, along with other devices used to avoid or minimize the payment of estate taxes. Estate taxes become an issue at the threshold of four million dollars (State of Illinois), while the federal estate tax threshold is over five million dollars, currently. Of course, Congress is always talking about eliminating or changing estate taxes, so estate tax planning is always subject to change.
Estate planning should always involve consideration of the possibility that you might become incapacitated during your life. We plan for incapacitation during life through the use of a Property Power of Attorney and a Health Care Power of Attorney. Powers of Attorney allow you to name an agent (typically a spouse, close relative or close friend) who you trust to step in and manage your personal affairs and make your personal decisions if you ever become incapacitated and unable to make those decisions or manage your affairs yourself. Powers of Attorney ensure that the person(s) that you chose are the person(s) who will manage your affairs and make your decisions if you are unable to manage them and make them on your own.
Finally, Health Care Directives are another component of estate planning that should not be neglected. We never know what lies in wait for us in our future. We hope for the best but we need to plan for the worst. Illness, injury or sickness can strike anyone of us at any time. Having Health Care Directives in place to guide the process if and when we are taken down by injury, illness or disease, is an important component of an estate plan.