Estate Planning 101

Estate Planning 101

The first step in the estate planning process is learning. What do you need to learn? I suggest this as your starting point: You need to discover how to stay in control of your stuff while you are able to be in control, as well as how to be sure that that your wishes will be carried out when incapacity or the grim reaper catch up with you. Sorry to rub it in, but at least one of those things is going to happen to you. Odds are that both of them will.

Starting Your Estate Planning Journey

The first steps in your estate planning journey are learning 1) how to stay in control of your stuff while you are able to be in control and 2) how to make sure your wishes are carried out when incapacity or the grim reaper catch up with you. Sorry to rub it in, but there is a 100% probability that at least one of these things is going to happen to you and a 70% probability that both of them will.

Trust Basics

A trust is created when a person transfers “stuff” to a trustee with the understanding that the trustee will manage it for the benefit of one or more beneficiaries. “Stuff” includes any kind of property you can own: real property, such as land and buildings (including timeshares) and personal property, such as bank accounts, stocks and bonds, and personal effects.

Choosing a Dignified Death

A Provider Order regarding Life Sustaining Treatment (POLST) says what measures should be used to keep you alive in a medical emergency. It is different from an Advance Directive in that it will be followed by emergency personnel, provided that they are aware of its existence. If you don’t have a POLST, emergency medical technicians (EMTs) are required to do whatever they can to restore and stabilize your heartbeat and breathing and take you to an appropriate facility for treatment.

Estate of Mind

Remember the classic Abbott and Costello comedy routine, “Who’s on First?” The longer they banter, the more their  frustration grows due to their seeming lack of understanding of the game they are discussing — and hilarity ensues.
Similarly, the language of estate planning can give rise to problems for the uninitiated, but the problems that arise may not be funny at all.

Give While You Live

Making gifts to your loved ones during your lifetime will enable you to see how your beneficiaries handle newfound wealth. This could be a great way to “test drive” your estate plan and determine how well it works while you are still able to make adjustments. If one beneficiary turns out to be a poor steward of your wealth, you can always direct assets to other beneficiaries upon your death.

Your Estate Plan: What NOT to Do

Problems with your estate plan may not become apparent until it is too late to fix them. Here are some common pitfalls:
• Failing to plan for large expenses, such as long-term care. • Failing to update your estate plan, including beneficiary designations on bank accounts, investment accounts, retirement accounts and insurance policies. • Failing to take steps to avoid family strife. • Putting your kids on the title to your stuff during your lifetime.

What is a Trust?

A trust is created when a person transfers “stuff” to a trustee who will manage the stuff for the benefit of one or more beneficiaries. “Stuff” includes real property — such as land and buildings — and personal property — such as bank accounts, stocks and bonds, and personal effects. The person who transfers the stuff to the trustee is called the trustmaker.

Hiring a Caregiver is Tricky

You may be tempted to treat a caregiver as a “private contractor” in order to avoid the humbug of tax withholding and buying the right insurance policies. You would do so at your peril. The IRS and the state will take the position that the caregiver is an  employee, that you are an employer and that all of the legal obligations that attach to those labels apply to your situation.

Let the IRS Take a Bath for Change

Nobody likes to pay taxes, but most of us like to take baths. Unless the bath is the kind where money flows out of your pocket and down the drain. If you feel like paying taxes is a lot like seeing your money go down the drain, you will be glad to know about an exciting estate planning opportunity that can help make the IRS take a bath after your death instead of your loved ones.

Beware: It’s the Return of the Estate Tax

The good news is that the federal estate tax took a vacation in 2010. The bad news is that it spent the whole year lifting weights and taking steroids. The estate tax is coming back in 2011, as big and bad as it has been in a long time. Now is the time to review your estate plan and make changes that could drastically affect how much of your estate goes to your loved ones, and how much goes to the IRS.

Do You Really Want to be a Trustee?

You were named as successor Trustee of a trust created by a family member or friend, and that person just died. What now? Before you rush in, think about what awaits. Until you sign on the dotted line, the fact that you have been named as a trustee does not obligate you to accept that position. Decide carefully, because once you accept the job, you accept all that goes with it. It is a position of great honor, and it involves great responsibility.

Who Gets My Stuff?

You may have heard the old joke, “where there’s a will … I want to be in it.” That may be true, but is estate planning really all about “who gets my stuff?” Who gets your stuff is important, but when you sift through the reasons for doing estate planning, you may find that identifying who gets your stuff takes a distant back seat to far more important considerations.

A Legacy of Aloha

Estate planning is the process of protecting that which is important and then passing those important things on to our loved ones and future generations. Many concepts that are central to Hawaiian culture are particularly applicable to estate planning. Starting with the concept of ‘ohana (a very inclusive notion of family), all the way through lokahi (a sense of unity — especially appropriate at the passing of a loved one), estate planning and the culture of our islands interweave to form a rich tapestry of aloha.

Don’t Be ‘Buried Alive’

Protecting personal privacy is generally a good thing, but can also have unexpected results. Consider the plight of a 90-year-old lady (“Nancy”) who was the life of her weekly exercise classes. Nancy was very well known for youthful outlook and zest for life.
So when Nancy missed class one day, her friends tried to contact her. All they were able to learn was that she had been moved to a nursing home.

Hiring a Private Caregiver Can Be Tricky

When hiring a caregiver, you may be tempted to try to make the process as simple as possible by treating the caregiver as a “private contractor.” You tell the person “I will pay you so much an hour, and you deal with the IRS and the State when it comes time to pay taxes.” After all, taking on the responsibilities of withholding taxes (and then paying the taxing authorities), buying Workers’ Compensation insurance, paying Social Security and Medicare tax, and all the rest, can be a real pain. However, the IRS and the State will take the position that the caregiver is an “employee,” that you are an “employer,” and that all the legal obligations that attach to those labels are applicable to your situation.

Mastering Change

Class reunions are poignant reminders of change. With each passing year, our classmates grow a little grayer, perhaps a little balder, and maybe a little more expansive at the midsection. Good thing we are not like our classmates, right? Actually, we are. Father Time is catching up with all of us. That sobering fact should inspire us to reflect each year on our estate plans and whether they still do what we want them to do.