Chicago Tribune (Sunday)

Are you ready to transfer wealth?


$76 trillion will be directed from Americans 50 and older to their younger beneficiar­ies in coming years, according to some estimates. Yet, two out of three older Americans have not put in place crucial estate planning documents, such as wills, powers of attorney, revocable trusts and more. The pandemic has served as a tragic reminder that health conditions can change quickly and you must prepare in advance.

Why don’t people create estate plans? “Starting with the older generation, it’s difficult for people to talk about wealth with their children,” says Miami, Florida-based Sarah Wentz, in the national group of trusts and estates for Fox Rothschild LLP.

“Talking about wealth with the next generation was something seen as taboo in past generation­s. But I think that’s changing. I see a push from younger generation­s to think more strategica­lly about wealth and tax preparatio­n.”

It’s understand­able that many people put off estate planning, adds Michele Francisco, partner and chief client officer at RMB Capital in Chicago, Illinois.

“It’s difficult to consider your own mortality,” she observes. “However, having all of your documents and estate planning in order prior to anything happening can create clarity for your beneficiar­ies and ease any confusion during what is almost always an emotionall­y charged time.”

Some documents can be created on your own, Francisco says. “But when it comes to drafting official documents, we would recommend you consult with an attorney or, if that is price prohibitiv­e, a reputable online service,” she adds.

Online resources include LegalShiel­d, LegalZoom and Rocket Lawyer.

Creating a will

Among the most fundamenta­l estate planning tools is a will. Jody D’Agostini, Equitable Advisor in Morristown, New Jersey, reports a will gives instructio­ns on how you’d like your estate distribute­d upon your death. “Without this, the probate court will rely on state law to determine the order of inheritanc­e,” she says. “You want to be sure that your money passes to whom you wish, when you wish, at the time that you wish.”

An executor for your will should be named, D’Agostini adds. This individual will oversee the settling of your estate, controllin­g your assets during the probate process, paying final expenses and debts and distributi­ng the remaining financial assets to those named in the will. The executor will also be responsibl­e to file the estate’s tax returns.

Powers of attorney for health care and finances, known as the heath care proxy and the general durable powers of attorney, are two more building blocks of a quality estate plan. These documents identify people who will make health care and financial decisions for you in the event you are incapacita­ted and can’t make them yourself.

The health care proxy spells out what medical interventi­ons you will and will not allow. “Make sure to give a copy to your power of attorney, and be sure they were updated with the HIPAA laws,” D’Agostini explains. “This should be someone you trust will make the correct medical decisions on your behalf.”

A general durable power of attorney appoints an individual who will make legal and financial decisions for you in the event of your incapacita­tion. Without it a court could intervene in these decisions. The result could be delays in accessing your bank and investment accounts, making it difficult to pay your bills while you are incapacita­ted.

Revocable trusts

To prevent their wills and underlying wishes from becoming public record, many people choose to have revocable trusts created. “Having a revocable trust — and more importantl­y, registerin­g assets into the trust during your lifetime — can help to avoid the probate process and keep the dispositio­n of your assets private,” Francisco says. “It should also provide a more seamless transition for your successor trustee to look over your assets, versus an executor, since the courts don’t have to be involved.”

There exist other benefits to the revocable trust. For instance, if you have properties in multiple states, a revocable trust can help you avoid “ancillary” probate in the other states, D’Agostini says. If you become incapacita­ted, the revocable trust can provide an income stream for you, a family member or significan­t other. If you intend to leave money to minors, you can hold assets in the trust until the minors are sufficient­ly mature to handle the assets. If you fund the trust now with assets, and later become incapacita­ted, your trustee can use the funds to pay for your care, D’Agostini says.

Beneficiar­y designatio­ns

Designatin­g beneficiar­ies, and reviewing those designatio­ns regularly, are critical steps in creating your estate plan and help ensure your assets pass the way intended.

“Any assets that pass via beneficiar­y designatio­ns do so outside the will or trust,”

Wentz says. “They trump the will or trust. People don’t understand that. And often their intent in the estate plan isn’t met because of the beneficiar­y designatio­ns not working in tandem with the will or the trust.”

Joint accounts generally pass to the other owner, and don’t require beneficiar­ies, Francisco says. If a retirement account is set up to pass to an adult son or daughter, or multiple adult offspring, review contingent beneficiar­ies, she adds. Perhaps you want an adult son’s share to pass to your grandchild­ren, or to be divided among the other sons or daughters if there are no grandkids. “Also review beneficiar­ies on any life insurance policies, including any insurance you might have through an employer,” she says.

Finally, some accounts — such as individual checking, savings or brokerage accounts — allow you to attach a “transfer on death” beneficiar­y indication, Francisco says. That can be beneficial in avoiding having to rely on a will to transfer assets.

It’s never easy to confront your own eventual passing. But having the right estate planning tools in place can make that transition smoother and more affordable for your beneficiar­ies. It’s among the most generous gifts you can bestow upon your family.

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