The Difference between Lifetime and Deathtime Planning… and Why a Comprehensive Estate Plan Must Include Both

Filed under Estate Planning, Estate Planning Blog | By

estate planning 91024According to a March 2017 survey by Caring.com, six out of ten Americans have no will or any other kind of estate planning in place. One in three said they didn’t need an estate plan because they didn’t have any assets to give someone when they’d died. So it’s all too clear that most of us think “estate planning” is a euphemism for “deathtime” planning.

However, comprehensive estate planning isn’t just about death. It’s lifetime planning, too. It’s about ensuring that your medical and financial decisions can always be made by someone you trust. Lifetime planning helps address potential tax liabilities, find benefit programs you may eligible for, and protect your family from costly guardianship or conservatorship court proceedings. And it allows you to choose who looks after and protects your affairs, if and when you’re not able to.

Lifetime Planning Tools

A good estate plan uses an array of lifetime planning tools, custom-tailored to an individual family’s needs. Here are a couple of the most common (and necessary) lifetime planning tools you should have in place.

Revocable living trusts

When people hear the word “trust,” they may envision “trust fund babies” or think that trusts are something only for the super-rich.

However, a trust is simply a legal tool that can help almost anyone with property – not just the wealthy. In a trust, assets you own are re-titled and transferred into the trust. When this happens, technically, you no longer own your real estate, stocks, bonds and similar properties. Instead, the trust owns them all. But you still control everything in the trust: You can still buy and sell these assets as if they were still in your name. In fact, revocable living trusts don’t even change your income taxes while you’re alive. You continue to file your tax returns as you always have. And as the creator of the trust, you can continue to make changes to the trust throughout your life as long you’re competent to do so.

Once you die, your chosen successor trustee distributes assets to the trust beneficiaries (the people, such as your spouse, children, a church, or other charity, you named to inherit from you). In many respects, the role of the trustee is similar to that of the executor of a will. But, a trustee of a properly funded trust doesn’t have to go through the public and expensive probate process. In fact, trusts are private, unlike wills, providing valuable privacy to your family.

Durable power of attorney

With a durable power of attorney, you legally designated an agent to act on your behalf, in the ways specified in the document. You can make the durable power of attorney broad in scope or quite limited, and it can become active as soon as you sign it, or only spring into action if you become incapacitated. Through the power of attorney, your agent may sign checks for you, enter contracts on your behalf, or even buy and sell your assets. But you control what they can and can’t do by what you authorize within the document.

Health Care Power of Attorney

In an instant, an accident can change a healthy, vigorous person into someone who can’t make her own healthcare decisions. Others face a long decline in mental capacity because of a disease like Alzheimer’s. But in either case, it is important to pre-empower those you trust to make medical decisions for you. This document is similar to the durable power of attorney, but authorizes an agent to make medical decisions for you if and when you no longer have the capacity to do so yourself. It should be incorporated with a health care directive to communicate your desired treatment and end-of-life care.

A Holistic Approach

Lifetime planning is a comprehensive approach to estate planning. And while it addresses needs of the living, comprehensive planning may also improve the after-death part of your plan as well, because it can reduce family conflict and preserve assets against court control or interference in the event of incapacity.

Dedicated to empowering your family, building your wealth and securing your legacy,

Marc Garlett 91024