Estate Planning Basics

Living Will and Advance Health Care Directive

The living will and the advance health care directive are basically the same thing.  Use of either term depends on who you talk to.  Some hospitals call it one, some the other.  Same goes for lawyers.

Both help you prepare for your end of life decisions.  Most people would choose to die surrounded by family and to go quickly, but most people would also want various interventions to prolong their life which may not allow them to die the way they want.  When it comes time, you are not likely to be in a position to make those decisions yourself.

Often spouses or children get put into a situation where they must determine what measures you want taken in the event of a serious illness or emergency. This can be an incredibly difficult decision, which is why it is important to have a living will.

The living will or advanced health care directive are documents that tell the doctors what procedures they can and cannot do to you or who will make that decision for you. They deal with issues such as when CPR or other interventions should or should not be performed, and what type of facility you would be taken to.

In order for your personal wishes to be carried out, you need to include others in the conversation. If you just fill out a form and assume everything is done, you will be disappointed. If you have a heart attack and are taken to the hospital, no one is going to know that you have a living will if you haven’t talked about it with your family beforehand. It is important that the people that will be making health care decisions for you are informed and willing to act in the way you would like.

When you decide to make a living will, you can go to a lawyer and pay him some money for the documents. Since I am a lawyer this sounds like a great idea, but there is a better way. Go down to the local hospital where you will likely be taken in an emergency and ask for a living will form. Most hospitals will have a form you can fill out that will reflect your wishes. When doctors see the form from their hospital, they will be able to act quickly to fulfill your wishes. If you take in a long legal document, the doctor is not going to have time to read it through and decide if they should perform CPR on you or not.  Some good examples of instructions and forms from a major hospital are as follows:



Within the living will, you will need to determine what type of medical procedures you would like (and not like) to have done. Some people might assume that you would like all procedures done so that you will keep living. However, it is important to understand what can and will happen if you choose to allow certain procedures. For example, when people think of CPR, they get this image from TV with a doctor pounding on someone’s chest to bring them back to life. On TV, 75% of the people given CPR have a good outcome.  In reality, only 8% of people that have CPR performed will survive longer than a month. You have 3% chance of having normal brain function. You also have a 3% of being in a prolonged vegetative state. Talking to a doctor about what happens during different procedures and what the possible outcomes would be is important when making these end of life decisions.

Get the facts.  Make the decisions.  Make sure your loved ones know about your wishes.  And then rest easier, knowing you have done what you can to make things easier for them and you when the unthinkable happens.

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Choosing Your Personal Representative in a Will

How to Choose an Executor or TrusteeCreating a will is one very important step to ensure things go smoothly when you die. Please be very careful who you name as your personal representative in a will. Choosing the right someone to administer your wishes can be as important as the document itself.

When you are creating a will, the lawyer is going to ask who you want to act as personal representative. The personal representative is the individual who does all the leg work after you are gone. He or she may need to pay your taxes, manage any businesses you own, represent your estate at court, and distribute or liquidate your assets. Because of all these responsibilities, there are traits that you will definitely want to look for in whom you appoint as your personal representative. Consider the following traits:

  1. Good with money.  The personal representative will be dealing with your bank account, life insurance money, taxes, selling assets, and many more money related issues.
  2. Trustworthy. You don’t want the personal representative running off with any money that frees up after you have died.
  3. Location.  The farther away the personal representative lives from where you and your assets are, the more difficult the required leg work will be.
  4. People skills. You want someone that has a good relationship with other members of the family. Any death of a loved one will create an emotional strain. You do not want your representative to add to that strain for the family.
  5. Organized.  All the separate tasks involved can be a little too much for some people to handle. If the personal representative can be organized, the probate process will be much easier. The representative is going to have to catalog all of your belongings and so being detail oriented and organized will be very important.
  6. Willing and able. All the skills in the world won’t help if they won’t make or don’t have the time to do it.

The perfect personal representative would have all of the traits listed above.  Unfortunately, not everyone does. You may need to weigh the advantages and disadvantages of different individuals close to you before coming to a decision. Make the best decision you can at the present, and be sure to change your will to name a different representative if circumstances indicate a need to do so.

You can list multiple people in your will to possibly act as personal representative. The first person on the list should be the person who best fits the traits listed above. After that first person you can list back-ups in case the first person is unable to act. This allows you to include all of your children in the will as potential personal representatives without their necessarily needing to actually act as personal representative.

These same traits apply to picking a successor trustee for a revocable trust. You will usually want to have the same person act as your successor trustee and personal representative because this can make administering your estate much easier.  However, you can also pick different people for each role if that is what you would like.

One last point needs to be made here. Some people may have heard that revocable trusts can replace the need for a will. This is not correct. Even if you have a trust you also need a will. The two work together to accomplish your wishes. For example, a trust cannot name a guardian for your minor children. The will is needed because guardianship appointment always involves the court. The guardian for your children will not necessarily be the same as your trustee or your personal representative, though they could be. As is true for the personal representative listing in the will, you can also have a hierarchical listing for who would care for your minor children in the event of your untimely death. You can always revise your will to allow for changes that might affect this listing or the need for guardianship at all as they reach adulthood.

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Inheritance and Estate Planning

Inheritance and estate planning are too easy to postpone.  Even though life is fragile, we tend to think we will live forever.Inheritance and Estate Planning  You can probably come up with a number of reasons to postpone your estate planning.  I don’t want to hear them.

Your parents can probably come up with the same list as yours.  However, according to the Center for Retirement Research at Boston College, the average household can look forward to an inheritance that ranges between $64,000 to $335,000 per household in the next 15 years.  To make sure this transition goes smoothly in the future, helping your parents with estate planning and inheritance issues is critical.

If you don’t worry about whether your aging parents have their affairs in order now, you will worry about it later.  You are the one who will have to pay unnecessary taxes and endure the time-consuming probate court procedures that come when good estate planning and inheritance issues are not in place.  If estate planning isn’t done, probate will eat 2-5% of the estate on top of estate taxes which absorb 37-55%.

Attention to your parent’s estate planning is not a selfish act: helping your parents shows them the love and respect you have for them.

Inheritance and Estate Planning Questions

Once you decide to help your parents with their estate planning and inheritance issues, some important conversations need to take place. The following questions will help guide your discussion. You will be able to determine what your parents have already prepared, what they may need, and what information must be found to help to complete the task.

1– What Estate Planning documents, if any, do your parents (or parent) have?

  • Is there a Will, a Trust, a Durable Power of Attorney or a Living Will?
  • When were they drafted?
  • Are they up to date with the current law?
  • Have they been properly funded?
  • Are they effective for the state of the family?

2– Where are the Estate Planning documents?

There’s nothing worse than being unable to find the paperwork when needed.

  • Who has been appointed executor or trustee?   This person should know about and accept this responsibility.
  • Have any steps been taken to avoid probate and cut taxes?

3 — Is there a distribution list of personal property, including emotionally charged items?

  • This is not stuff that can be bought at Walmart, but irreplaceable items.
  • These items may not have physical value, but sentimental value

4 — Are life insurance policies protected with an insurance trust?

5 – What if you need long term care?

  • How do you intend to deal with this increasingly common issue?
  • Are you interested in Rest Home Insurance?

Undoubtedly there are other questions you need to ask your parents about estate planning and inheritance, but this list will help you get started.  Please don’t wait.  Now is the time to help your parents get their estate planning and inheritance completed.  The good news is that proper estate planning can greatly alleviate expensive and time consuming procedures.  The bad news comes with the reality that discussing money, especially in this context, is very unpleasant for most families.   We have found that many people would rather get a root canal than discuss estate planning with their parents.

Now is the time to take action.  Without some estate planning in place, your inheritance will be a financial hornets’ nest. It is worth the time and effort it takes to firm up your parent’s estate planning. They have undoubtedly worked hard for what they have and helping them preserve and plan for its future shows respect. It also will give them a comforting peace of mind.  We see it all the time with our clients.  Once their affairs are in place, they get a new lease on life.

If you do not know how to approach your parents or are afraid to try, I get it.  Some parents are so authoritarian, or unapproachable.  If that is the case, give them a copy of Protecting Your Financial Future.  It is a very fun and readable book. Once folks start to read it, I know they will want to get their planning done.  For many families, the sooner this discussion takes place the better.  The worst time to have to worry about these matters is when a parent is in intensive care. Get the financial decisions out of the way, so that if there is a crisis or emergency, you will be able to focus on compassion, comfort, and healing instead of paperwork.

Lee R. and Kristy Phillips

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How to Choose an Executor or Trustee

How to choose an executor or trustee requires some thought and analysis.  An executor is the person or company that handles How to Choose an Executor or Trusteeyour estate after you die.  Whether your estate is held in a trust or is passed by your will, you need an executor or trustee to take care of the winding up or distribution of your estate.  It is a big responsibility to be in charge of someone’s estate, so it is important to pick someone who can deal with both the personal problems in the family as well as the business problems that come with passing the estate.

We know from years of observation that often things don’t go as planned when someone dies.  It may be that the sale of a piece of property is tied up.  Someone could sue the estate.  There could be a health issue for one of the heirs.  Whatever the problem, the executor will need to deal with it.  That “it” will take a toll in both time and energy. As you make your choice, remember that you need someone who can take the time to deal with these and other issues.

While the executor is dealing with those unplanned items, the heirs will be anxious to collect their money and move on. However, the executor or trustee will have to take time to do things properly because the executor is required to settle the affairs before any distribution can take place.  He can’t cave to the heirs but will still need to make the heirs happy while winding things up. When you choose an executor or trustee take this into consideration. Pick someone who can get along with the heirs.

In our condo units in Florida we see this problem pretty regularly and it always costs the estate.  When someone dies, nobody thinks to pay the condo fees. Before long the executor or trustee begins to get past due notices from the condo association.  The family begins to jump at the bit for money and the condo is sold quickly at a loss to appease the heirs.  Last year a $400 plus condo next to us sold for $70k and the outstanding condo fees.  If you choose an executor or trustee who can’t deal with the heirs or who has poor business sense it can cost your estate three fourths of its value.

When someone dies, all the final expenses must be paid and the affairs wound up.  Six months ago, a neighbor of ours died.  We saw the son outside the home the other day and stopped to say hello.  He told us he was the executor trustee and he was still trying to empty the house.   There is a “For Sale” sign up, but the son said that they will need to pay for some renovation before they can get a decent price.  It sounded like the kids were all working with the trustee to ensure that they would get a better inheritance.  This all-too-rare exception may be how your heirs will act if you set up proper expectations and a good trustee or executor.

The important thing is to choose an executor or trustee who can take charge of your estate and solve the problems that arise.   Remember to pick someone who can deal with both the personal problems in the family and the business problems that come with passing the estate.  You have worked hard to get your estate. Make sure you protect it for your heirs.

Lee Phillips and Kristy Phillips

Check out more tips on setting up your estate in our book,  Planning for Your Financial Future.

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We wish everyone in America had the means to obtain the knowledge that Attorney Lee Phillips is attempting to impart in the Accumulation and Preservation of Wealth course. We are thankful that there is a legal system that is designed to protect people’s assets, no matter how little or how much.
~ Ed, Dallas Texas

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