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Estate Planning Checklist

The Ultimate Disability and Estate Planning Checklist

By Matthew V. Piwowar – Preparing a family Legacy Protection PlanTM involves more than simply deciding who gets your stuff when you are gone, and how to avoid probate court.  The following Disability and Estate Planning Checklist is a comprehensive review of all the issues you should plan for if you want to protect your family’s legacy: (i) while you are alive and healthy, (ii) while you are alive but need assistance (legal, financial, medical, daily activities), (iii) after you die, (iv) after your spouse dies, (v) while your children are alive, and finally, (vi) after your children die.  Each of these stages of life require an estate plan in order for you to protect your family.

Yes, this Estate Planning Checklist is long. Life is complicated, and there are many legal, financial, and health risks.  Only with a plan can you hope to protect yourself and your family from life’s ups and downs. The Legacy Architects’ estate planning process includes everything on this estate planning checklist for one flat fee. We encourage you to share this Estate Planning Checklist with friends and family.  Link to it on your website, share it on facebook, and get the conversation started.

Disability and Estate Planning Checklist

    1. Retirement and Long-Term Care Financial Planning. I have reviewed many estate planning checklists, and in my opinion, most of them are backwards.  They almost always start with a Last Will.  Ironic, considering its name.  A last will is used to divide up your remaining assets between your loved ones after you die.  Which is important, but first you need to make sure you have available assets while you are alive, and something left to give to your heirs when you die.  What good is a last will if all your assets are used up for your long-term care.  Or worse, your loved ones are forced to use their assets for your care because your funds run short?

      Therefore, the first step in any good estate and disability plan, and the first item on a good estate planning checklist, is meeting with a financial advisor to discuss retirement and long-term care planning. I spent over 15 years as an international finance, business, and banking attorney before focusing my practice on estate and disability planning, and I still consult with financial advisors for my personal financial plan; you should, too.

    2. Disability Planning. With each so called estate planning checklist I review I see a pattern.  They either don’t mention disability planning, or it is left for the end of the list without much explanation.  A complete estate planning checklist should start first with protecting you while you are disabled. What good is an estate plan that decides who receives your assets, if your assets are gone before you die?

      If you’ve made it to 50 and you’re healthy, then you need to plan to live until you are 95.  That means you are virtually guaranteed to have several months or several years where you are alive but not competent to manage your financial, legal, and medical affairs. And disability is not limited to old age – an accident or bad diagnosis from your doctor could leave you unable to manage your affairs tomorrow.  That is why today, every estate plan must have a disability plan.

      Your first step in disability planning is deciding who will have the authority to decide that you are no longer competent to manage your own affairs.  If you do nothing and have no plan, then it is a judge who will decide when you are incompetent at a mental competency hearing.  Without a plan, you are leaving this most critical decision to a total stranger in a public setting, involving attorneys and legal fees.

      A power of attorney (POA) is not the solution.  Most POAs don’t mention competency, or if they do, they simply say “when you are not competent,” but don’t explain who decides.  Some POAs say that two doctors will decide, but who picks the doctors?  Are all doctors the same?  What if your children find two doctors who say you are not competent, and you find two doctors who say you are competent?  Now you are back in court.  Powers of Attorney are NOT a disability plan.  The best way to handle this critical issue is with a Disability Panel that you establish in your Revocable Living Trust.

      Your second step is to decide after you are disabled (mentally incompetent), who will manage your financial, legal, and medical affairs.  Again, a POA is NOT a disability plan.  A POA only states who has authority to act on your behalf.  It does not provide instructions on how you want your affairs managed, what your priorities are, or who your agent should consult with for legal, medical, or financial advice. Should your assets be used to take care of only you after you are declared incompetent or can they be used to take care of your adult children or grandchildren?  All of these issues should be addressed in your revocable living trust.

    3. Health Care Powers of Attorney. Once you decide who you trust to make all of your decisions for you when you cannot make them yourself, you must document your decision in several legal documents.  The first of which is a Health Care Power of Attorney, in which you authorize your agents, called “your patient advocates,” to make all of your medical decisions for you when you cannot make them yourself.  A good Health Care Power of Attorney will not only name your Patient Advocates, but will also provide a detailed description of your views on common medical procedures typically used to delay the dying process in terminally ill patients.

      Most off-the-self forms simply appoint someone to make all your decisions.  You want a customized Health Care Power that explains how you want to be cared for, and what your views are with respect to specific medical procedures.  The more you explain in your Health Care Power, the less of a burden it is on the loved ones you have chosen to make all of the decisions.  A standard form places all the burden on your patient advocates.

    1. Living Will. Before moving on to dividing your assets after you are gone, you should first decide how you will leave this world.  For that, you need a living will.  Despite its name, a living will has nothing to do with dividing your assets, it only provides end of life directives concerning life support, artificial fluid and nutrition, and other medical procedures that can be used to prolong the dying process.  Without a living will, your family may fight over when life support should be disconnected, or they may need to go to probate court to get a court order to turn off life support.  Most siblings who fight over making this final decision for their parents spend years not speaking to each other.  You should take the decision away from your children and make it for yourself in a living will.
    1. Memorial Instructions. The last item to wrap up your personal affairs before you worry about what happens after you are gone, is providing your family with your memorial instructions.  Don’t leave this complicated and expensive process in the lap of your family during what will be one of the most painful and stressful times of their lives.  A good family Legacy Protection PlanTM will include a simple to use, but detailed form and process to decide the major issues regarding your funeral or memorial instructions.  Failure to spell out your wishes will result in your family wasting money on expensive services, meals, flowers, etc., that you may not want.  Failure to plan often results in fights between family members who disagree on where you should be buried, or in what church the funeral should be held.  With second marriages this can all end up in court when the children from the first marriage disagree with the spouse or children from the second marriage.  Solve this problem by working with an attorney who provides counseling on memorial services.
    1. Provide for Funeral Expenses. Work with your financial advisor to set aside funds, either in a separate account, or through a separate small life insurance policy that will be used for your final expenses. It can be set up to provide only for funeral expenses, or it can be larger so that it can cover your last month’s medical bills, or even transportation costs for your children or grandchildren to travel to your funeral.  The important thing is that it is segregated only for the final expenses that you designate and that you make it clear in your memorial instructions that you want your final expenses budget to not exceed the funds in this special account.  Without this step in your plan, your family may use their own funds, or use up their inheritance.
    1. Revocable Living Trusts.   There are many estate planning myths about how to avoid probate court. However, the only way to safely and legally ensure that you avoid probate court, and that your assets are protected from taxes, creditors, ex-spouses, and criminals is with a trust.  There are many types of trusts, and deciding which one is right for you and your family should be done with the advice of an experienced estate planning attorney.

      The most commonly used trust is the revocable living trust.  This trust allows you to have complete control over your assets while you are alive and mentally competent, allows you to modify it any time you want, and allows you to continue to file only your personal income tax return using your social security number.  Once set up, and all your assets have been moved into the trust, life goes on as normal.  The trust is simply holding your assets as owner or beneficiary in case something happens.  If you or your spouse become disabled or die, the protections of the trust automatically kick into effect, and protect you and your assets from criminals, creditors, taxes, and family conflict.  It does all of this while avoiding probate court, and keeps the entire process private.

      A properly designed trust will be a multigenerational asset protection trust.  This simply means that the trust does not end when you or your spouse dies.  Rather, it continues on and holds your assets in trust for the benefit of your children and grandchildren during their lifetime.  Most trusts provided by general practice attorneys and internet forms are NOT multigenerational.  These basic form trusts are set up to only avoid probate, but then liquidate and distribute all of your assets directly to your children without any protection from their creditors, divorce, disability, medical bills, or criminals.  These form trusts typically do not provide for long-term care and disability planning.  Most individuals with a basic form trust do not know that it does not protect their children after they die, or that it was even an option to have the trust provide such protections.

      Make sure you discuss how your trust works with an attorney experienced in estate planning. Changes in law and technology, together with more attorneys focusing their entire practice on estate planning have made multigenerational asset protection trusts affordable for everyone.  Today, a typical multigenerational trust based estate plan costs about one-third of what it did back in the 1990’s.

      Another common trust is the Medicaid Asset Protection Trust (Medicaid Trust).  It is important to work with an attorney who will counsel you on the pros and cons of a Medicaid Trust.  This type of trust serves an important purpose but its not for everyone.  In fact, it is not the correct trust for most individuals.  They are expensive, complicated, and force you to give up control of assets much earlier than you may want to.

      However, for some people, a Medicaid trust is the only way to protect certain assets like a family farm or cottage, or to ensure that your parents have the quality of life you want them to have in their final years.  It is important that you work with an estate planning attorney and financial advisor who do not automatically put everyone into a Medicaid trust.  Your advisors need to be able to explain to you in detail how this type of trust works and counsel you as you decide if it is appropriate for your family.

    1. Financial Power of Attorney.  Even with a trust you will still need one or more financial powers of attorney (financial POA).  But your financial POA should be tied in with your trust so that they work together.  Because you want to keep the contents of your trust private, you will not have your agents give copies of your trust to every bank and business they have to deal with.  Instead, your agents will use a financial POA and certificate of trust to prove their authority to act on your behalf.  Financial POAs are always needed, but they are particularly important when you are a business owner.  Sometimes, you may have a separate financial POA for your personal affairs and a second financial POA for your business.
    1. Last Will or Pour-Over-Will.  No estate planning checklist would be complete without a last will.  Even with a trust you will still need a will.  It is a specific type of will called a pour-over-will.  It is a safety net in case you forget to put an asset in your trust.  The only beneficiary of a pour-over-will is your trust.  If you forget to put an asset in your trust, that one asset will go to probate.  Once there, the pour-over-will forces that asset into your trust.  A pour-over-will or traditional last will is also where you designate the legal guardians for your minor children.  If you do not have a trust, you will have a traditional last will.  A traditional last will, without a trust, guarantees that your estate will go to probate court.  Only the probate court can settle a traditional last will.

      In some very limited cases, a traditional last will and not a trust is all that you may need.  As a general rule, if you are under 25, single, have no children, no IRA or a very small IRA or 401k, and you do not own a home or business, then a traditional last will and health care POAs may be all that you need.  The same may be the case if you are 85 or older, and you do not own a home and do not have a large IRA or 401k – then a traditional last will and health care POAs may be all that you need.

      In all other cases, you should have a trust.  If you have minor children, it is imperative that you have a trust.  Children under 18 cannot inherit, so the court will establish a trust, and will pick the trustees and set terms. Typically the children take over their court created trust when they turn 18.  If your children are from a prior marriage, the court will often make your ex-spouse the trustee of your assets.  The assumption is your ex-spouse can be trusted to act in your children’s best interest while managing your assets.  Why let the judge (a total stranger) design your children’s trust?  You should do it yourself.

    1. File Beneficiary Forms. This is one of the most overlooked, but most important steps in your estate plan.  All of your IRA’s, 401k’s, life insurance, home insurance, and auto insurance all have beneficiaries.  Its important to ensure that you file proper beneficiary forms designating either your trust, your spouse, or children as beneficiary.  In most cases, you will designate your trust as the beneficiary, but not always.

      Who you designate is a complicated legal question, and should only be done after consultation with an estate planning attorney.  Do not take the advice of your banker, your employer, your IRA or 401k administrator, or even your CPA.  In 9 out of 10 cases they will get the answer wrong.  It is critical to get this step correct. The answer is not the same for every trust, and depends on the terms of your trust and the asset. For example, a Legacy Protection Trust is able to hold an IRA with no negative consequences, and many benefits. Most regular trusts on the market cannot hold an IRA without some negative consequences.

      Anyone who advises you on this matter without reading your complete trust can never hope to get the answer correct, yet that is what most advisors do.  You can spend a lot of time and money on your trust and estate plan, only to destroy the entire plan by getting this one step incorrect.  If your beneficiary designations are not correct, your trust and estate plan will not work.

    1. Understand Tax Issues. Too many checklists skip or oversimplify this topic.  Every estate planning checklist must include taxes, and not just estate taxes.  First, only the tax law in effect on the date you die applies to your estate.  To say your estate does not have a tax problem today is meaningless.  That is why you need to work with an estate planning attorney who has a maintenance program. The program keeps your trust current, so you won’t have a tax problem when you become disabled or die.

      Yes, the new tax law gives anyone who dies after January 1, 2018 a $11.2 million coupon (exemption) available for the estate tax (death tax) which covers most individuals. But surprise, on January 1, 2026 the law automatically reverts back to the law in effect back in in 2017!  Will the current law be in effect the year you die?  Not planning on dying before 2026?  This amount has gone up and down many times in the last 50 years.

      Are you sure you will not die from an accident or medical malpractice resulting in a multimillion dollar claim?  Maybe you will have more than the current exemption amount when you die.  Did you know that some of the gifts you make during your lifetime may be counted against your exemption amount?  These gifts may reduce the size of your available exemption upon your death?  To get your exemption, your family must timely file paperwork with the IRS after you die, do they know that?

      The estate tax is not the only tax that can take a chunk out of your estate.  What about income tax, capital gains tax, gift tax, and property taxes on your assets?  Does your plan take all of them into consideration?  It is important to have a flexible plan that is updated annually to ensure all your tax issues are addressed.

    1. Consider Additional Life, Disability and Long Term Care Insurance. After you complete the estate and disability planning process you may notice financial holes in your estate plan.  You should then meet with your financial advisor to discuss your insurance situation.  Term life, disability and long-term care insurance have become more affordable in recent years. They may be the best way to plug the holes either permanently or temporarily in your estate and disability plan.  These types of insurance also become imperative if you are the owner of a business. They are also useful if your estate will have estate tax, income tax, or gift tax issues.
    1. Protect Your Business. Business owners should consider a business succession plan to provide for transition of the business to the next generation, or to sell the business.  The plan should also provide for what happens if you die or become disabled before you sell  the business.  Failure to have a succession plan may result in your family losing the single largest asset you have.
    1. Record Keeping. A good estate planning attorney will provide a comprehensive list of financial and legal documents that you should store safely.  You want to ensure that your family has access to them in the event of your death or disability.  Our list of important documents is three pages long and growing.  It should also include documents that should be destroyed in order to avoid identity theft.  Yes, your identity can be stolen after you die and used to borrow money.  Then the creditors will go after your spouse or children for repayment.
    1. Maintaining Your Plan. Even a perfect estate plan must be kept up to date.  Changes in the health or finances of your family, your business, or the law can all impact your estate plan.  This impact may require you to modify your plan.  Only the law in effect when you die controls how your estate plan works, and how your estate is divided.  Therefore, it is important to work only with an estate planning attorney who provides a formal annual maintenance program.  The program should keep you informed of changes in the law. It should also provide annual consultations to confirm that your estate plan is up to date.

      Many lawyers will say they have a formal maintenance program. But it turns out that most of them only offer an anniversary letter, or a newsletter.  Anniversary letters and newsletters are useful, but by themselves, they are NOT a formal maintenance program.  With a formal maintenance program, you will actually meet with your attorney at least once every year. Additionally, the law firm will actually track your assets in order to ensure they are properly in your trust.

      More importantly, a formal maintenance program will provide you with updated legal documents (trust and POAs) at least once every other year (at no cost above the annual fee).  There is typically an annual fee for a formal maintenance program.  The fee can range from $500-$1000 per year, depending on which law firm you use and the services included.  It is worth the fee when you consider that you get entirely new legal documents every other year. In addition, your entire plan is reviewed annually.

      The older you get, or the more complicated your family (second marriages, business owners, etc.), the more important it becomes to review your estate plan annually. After you spend the time and money to put am estate plan together, why would you let it become obsolete?  Keep this estate planning checklist handy and review it as a reminder of all the issues you should consider annually.

    1. Get Started Now! The most important step is to get started now!  Less than 15% of adults have an estate plan and the main reason is procrastination.  Review and discuss this Estate Planning Checklist with your loved ones now.  Stop researching and pick up the phone.  Call a few estate planning attorneys and set up an initial consultation, or attend a workshop.  Only meet with attorneys who agree to meet with you for free for the first hour.  You could also attend a free workshop.

      Compare their estate planning checklist with this Ultimate Estate Planning Checklist.  Compare their programs and their personal style.  How many of them discuss all the items on this estate planning checklist in their program?  How do they charge for each item on this estate planning checklist.  Do they bill by the hour, or is it a flat fee?  Do they charge for every phone call, or can you or your financial advisor call without you getting a bill?  You won’t be able to discuss every item on this estate planning checklist in one meeting. Will you be charged for each follow up call?  Remember, this will be a lifetime relationship. So only pick an attorney you feel comfortable with, and who has a formal maintenance program you like.

This Disability and Estate Planning Checklist was compiled by Matthew V. Piwowar.   Mr. Piwowar is an estate planning attorney based in the metro Grand Rapids, Michigan area and providing estate planning and probate services across Michigan.  Mr. Piwowar is a member of the State Bar of Michigan, the National Network of Estate Planning Attorneys and the Michigan Forum of Estate Planners.

Contact us to learn more about this Disability and Estate Planning Checklist.  Don’t forget to share this Disability and Estate Planning Checklist with your friends and family.