Last month I discussed why the details are important in planning your estate, and why any suggestion to the contrary is, in my opinion, just wrong. This month, I’m going to give you some suggestions on how to get ready for a meeting with your lawyer to prepare your estate plan, or if you already have one, a meeting with your lawyer to update your estate plan.
Where do we start? I like to make lists. Here’s a list, in order of importance, of things to find out and think about before that first meeting:
- Choose (at least tentatively) who will make decisions concerning you and yours (and have a backup decision maker in mind);
- Find out what you have that already has beneficiaries named and who those beneficiaries are;
- If you have assets with other people named on them, find out what rights the others have;
- Have some idea of how you want your estate distributed;
- Have full names of family members, full names and address of non-family members, and dates of birth for individuals under 18 who are to be named in your estate plan.
This list isn’t necessarily exhaustive, but those are the primary considerations. There is probably some room for disagreement on the order of importance, but when you look at it from the perspective of organizing your affairs, I think you’ll agree the order is pretty accurate.
Nathan B. Hannah, attorney
You will notice that the actual distribution plan for your estate is at the bottom of the list. Frequently, that is the easy part. Choosing who will make decisions concerning you and your estate can be much more difficult.
You will also notice that in choosing a decision maker I included decisions concerning you, as well as your estate. The reason for including you is that an estate plan will frequently include a power of attorney. With a power of attorney, what you are doing is giving someone else the ability to make decisions for you if you are still living but unable to make decisions for yourself. Obviously, care must be taken in the selection of a person who will have that kind of decision making authority.
What kinds of assets have beneficiaries already named? The most obvious example is life insurance. A less obvious example is (most) retirement plans. Finding out who is designated as the beneficiary on those assets, and updating those designations if appropriate, is an important part of planning your estate.
Next on the list is assets with other people named on them. What do I mean by that? Joint bank accounts are a prime example. Some joint bank accounts are truly jointly owned. Others aren’t really joint bank accounts at all, but just have a second person named as an additional signer on the account. The distinction can be very important.
As for how you want the estate distributed, that’s entirely up to you. One thing to keep in mind is that the more specific gifts you give, the less there will be for the residuary beneficiaries (the ones who get the “rest, residue and remainder”).
Another consideration is that, to put it directly, others may pass away before you do. A question I often ask in sorting out the final distribution is: what happens to a gift if the person who is to receive it doesn’t outlive you? Since you don’t want any uncertainty about who is to receive the gifts provided for in your estate plan, the importance of full names is obvious. Dates of birth for individuals under the age of 18 are important so that the person in charge of the estate knows if those individuals can legally receive their gift directly or if another procedure must be undertaken (if the intended recipient is still under 18 at the time the gift is to be distributed).
This discussion, like the list it follows, is not necessarily exhaustive. There will be other considerations, depending on your situation. If you have thought about each of the items on the list, however, your estate plan will come together much more easily than if you have not done so.
Next month I’ll get into some more specific situations that must often be dealt with, and how to prepare for those.
Why Should I Form a Corporation or Limited Liability Company For My Business?
A corporation or limited liability company (“LLC”) has a legal existence separate from its owners. Because of that separation, if a business operates in a corporation or LLC, the property of the individual owners of the business cannot be taken by its creditors to pay its debts. If the business is held responsible for causing an injury, the property of the individual owners likewise cannot be taken to satisfy that liability.
If a business has more than one owner, a corporation or LLC can also provide a method of defining the ownership interest that each individual owner has in the business, as well as a simple mechanism for changing those interests. To plan for what happens if one of the individual owners of a corporation or LLC dies or wants to sell his or her interest in the business, the owners collectively can make an agreement that controls what will happen to the ownership in those circumstances. If the business has significant value, the corporation or LLC can buy life insurance to pay for the acquisition of a deceased owner’s interest.
Nathan B. Hannah is a Shareholder in the Tucson office, and practices in the areas of estate planning and administration, real estate, and commercial transactions. He is also a noted blogger, and you can find more of his articles on his private blog,
Contact Attorney Hannah: nhannah@dmyl.com or 520/ 322-5000
