Estate planning

Estate Planning Basics: What Everyone Should Know

A Guide to Planning for Your Future

So you’ve decided to tackle estate planning head-on instead of saving it for another day—congratulations! This is a big step, even if it doesn’t seem like it right now. Most people may agree estate planning is important, but actually starting the process puts you ahead of around half of Americans.

We know there’s a lot of information out there on this topic, and frankly, trying to sort through what matters at this stage can be difficult. In this blog, we’ve put together a beginner’s guide to estate planning. Creating the actual documents and systems that make up your estate plan is only part of the process. Much of the planning can be done before you search for will templates or speak with a lawyer. All you need to get started is your brain and something to write with.

What’s the Point of an Estate Plan?

If you’re reading this blog, you probably already know some of the benefits of having an estate plan. The various documents you’ll create will:

  • Designate someone to make medical decisions for you if you become incapacitated
  • Designate someone to make financial decisions for you if you become incapacitated
  • Outline your wishes for end-of-life care
  • Guide the division of your assets upon your death
  • Determine the process of asset allocation

This means you’ll need to think about multiple possibilities for your future and figure out the arrangements you’re most comfortable with. Nothing you decide today will be set in stone—in fact, we recommend revisiting your estate plan once a year to see whether you need to update any of its elements. But, you also want to give yourself time to think deeply about these issues so you can make decisions you are confident in.

The Advance Directive: Your Medical Decisions

A freak accident can result in an incapacitating injury at any time. As we age, we’re also at increased risk of medical conditions like stroke or dementia that can erode the ability to care for ourselves. With an advance directive, you can provide instructions for your loved ones on what types of treatment you would (or would not) like to receive. You can also appoint a healthcare agent to make medical decisions for you if you are unable to.

Question: What Are My Values Surrounding Illness and Treatment?

Most people’s medical decisions are driven by an underlying set of beliefs or values. Your advance directive ensures you receive the type of treatment you’re comfortable with even if you can’t communicate your wants at the time. You can use it to specify whether you’d like to receive:

  • CPR
  • Ventilator use
  • Artificial nutrition and/or hydration
  • Comfort (palliative) care

For many people, these aren’t simple yes/no answers: They depend on the circumstances. For instance, we now know that a ventilator can be essential in saving COVID-19 patients. This treatment may not work and, even when it does, can leave patients with lung damage after they are removed from a ventilator. On the other hand, some health issues that interfere with your breathing could mean you would need a mechanical ventilator for the rest of your life. Is one of these situations okay with you, but the other not?

Due to the complexity of medical issues, this topic might take some heavy thought. It’s okay if you can’t answer every question right away. Figuring out which principles you’d like to guide your care is the larger part of the work.

Question: Am I Susceptible to Certain Health Conditions?

Maybe you’ve always had high blood pressure, or there’s a history of breast cancer on your dad’s side. Knowing your and your family’s healthcare history can help you predict the questions your loved ones might face if you end up in emergency care. Then, you can create specific directions and plans for the care you’d like to receive.

Your primary care provider may be able to help you identify issues that might arise and discuss your options.

Question: Do I Want to Give Someone Else the Power to Make Healthcare Decisions for Me?

It’s usually not possible to cover every single topic or concern in an advance directive, which is why many people choose to designate an agent who can make decisions if you are incapacitated. You’ll want to choose someone you trust and who fully understands what matters to you.

When you ask someone to be your agent, we advise having an in-depth conversation about your wishes for medical care. It may be uncomfortable, but it’s the best way to ensure you’re treated the way you want to be even if you are unconscious or otherwise unable to communicate.

Question: Should My Agent Have Some Authority Even When I’m Okay?

In Utah, you can allow your agent to access medical records and admit you to a long-term care facility, even when you are capable of speaking for yourself. Does this sound like a good plan to you, or is it too invasive? Are there other rights you would like to grant your agent or things you would like to bar them from doing, even if you are incapacitated? These issues can all be addressed in your advance directive.

Question: Do I Have Specific End-of-Life Wishes?

Some people choose to become organ donors upon their death, while for others, the idea goes against their beliefs. Scientists are continually looking for volunteers for clinical studies—would you want to be enrolled in one, even if it might not help you? These answers are part of a complete advance directive.

Finally, you will need to decide whether you’d like your medical team to prolong your life as long as possible or withdraw life-sustaining care in certain conditions. You can leave this decision to your agent or spell out your wishes directly.

Creating an Overarching Philosophy of Care

Many of us haven’t considered our medical care wants outside of a few specific instances. If you aren’t sure what your values are, going through the questions above can help you figure them out. Look for patterns in your answers and keep track of the thoughts that make you cringe internally. There’s a reason behind your choices, and writing them all out can help you find it.

Once you make it through these questions, congrats: You’re a third of the way done! The advance directive is the hardest part of estate planning for many people because of the thought that goes into it. Now, we can move on to financial matters.

Durable (Statutory) Power of Attorney: Maintaining Your Finances

If you are incapacitated, you may also need someone to step in to manage your finances. This issue may be less complex than an advance directive, but it still requires knowledge of your affairs and serious decisions.

With a durable power of attorney, you can designate one agent and up to two successor agents should the first person be unavailable. While your agent does not have to be someone related to you, it should be someone who is good with finances and whom you trust entirely.

Question: Which Assets Should My Agent Control?

A power of attorney doesn’t release all your possessions into someone else’s control. You can pick and choose which elements you want your agent to have access to. Depending on your financial situation, you may not need to give your agent authority over everything. For example, if your property is paid off and your stock portfolio consists of index funds you don’t want to change, what would your agent need with these assets?

On the other hand, your agent may need to take action to cover costs by applying for government benefits, filing insurance claims, or withdrawing money from your retirement savings. You should go through each of your accounts, properties, and other holdings and ask whether it’s reasonable to expect them to stay undisturbed if you’re incapacitated.

Question: How Many Changes Can Your Agent Make?

Depending on the powers you give your agent, they could completely take over your financial affairs. In Utah, you can pick and choose the rights you want to pass to your agent. What you don’t want to do is select every option without careful consideration.

The Utah Statutory Power of Attorney form is available free online, so you can see the options you have. Anything you do not understand should be discussed with a financial planner or attorney before you sign any documents. If something were to happen tomorrow, we want to be sure your estate will be managed to your wishes.

Question: Do I Have a Will or Trust that Covers These Actions?

If you’re here, you probably don’t have a will or trust set up yet, but keep in mind these documents might overlap with a durable power of attorney. If you’re satisfied with the arrangements made elsewhere, you probably do not want to grant your agent the right to change them.

On the other hand, you may want to give someone else full control if you are incapacitated, trusting them to make changes if illness, death, divorce, or any other circumstances affecting others might interfere with your plans. It depends on what you are comfortable with and how actively you want your estate to be managed.

Protecting Your Finances Matters

The agent you choose to handle your affairs in case you are incapacitated must act in your best interests and follow the wishes laid out in your power of attorney. As with your advance directive, it can help to have a one-on-one conversation with your agent to outline your financial principles.

Now that you’ve made it through your power of attorney questions, you’re two-thirds of the way done! Our last step today will be considering how you want your estate managed after your death.

Revocable Living Trust or Last Will and Testament: Where Your Assets Will Go

Dividing your assets after death can be done in two ways: with a last will and testament, or with a trust. If you’re not sure what a trust is, you’re not alone; most Americans are more familiar with wills, perhaps because they are more often cited in the media.

The method that’s best for you may vary based on the assets you have and your plans for your heirs. Or, you may choose to have both a will and a trust—but keep in mind that in case of conflicts, your trust will likely prevail.

Question: What Are All My Assets?

Before you determine who you want to inherit your assets, you need to identify everything. This means gathering deeds, documents, account numbers, and in some cases contact information for everything from bank accounts to vehicles to debts.

Not all significant belongings come with deeds, however. If you have family heirlooms, expensive jewelry, or other belongings with sentimental value, write these down as well so you don’t forget to specify your plan for each.

Question: Who Do I Want to Provide For?

Determining a fair division of assets is difficult, especially considering that some may depreciate (lose value) while others appreciate (gain value) over time. The first step is to make a list of people you’d like to bequeath your assets to. This may include children, adopted children, siblings, a spouse, relatives with special needs, or even charities or causes you support.

Question: Is My Estate Significant?

Because a trust costs more to set up and maintain, some individuals with smaller estates decide a will is the better option for them. This means your loved ones will have to go through the probate process after your death, which is often costly itself. If your estate does not have real property and is under $100,000, probate is not required—a small estate affidavit can be used instead.

Estates over that amount may be better served by the creation of a trust. Along with allowing your wishes to be carried out without the hassle of probate, a trust is private, while wills enter the public record. For those with considerable assets, a trust may also provide significant tax savings.

A financial planner or attorney can look at your assets and help you lay out the pros and cons of each method.

Question: How Much Control Do I Want Over Asset Distribution?

A will is sufficient for laying out the basics of asset distribution, but a trust allows you to be more specific about how or when a beneficiary (heir) will receive certain assets. In a will, you appoint an executor who will oversee the division of your assets but may use their own judgment for you to best meet your wishes.

As you did while thinking about your power of attorney, you’ll need to consider whether you trust your executor to make those decisions or whether you’d prefer to lay out the terms yourself. Additionally, because a trust may require continued management, it’s important to ask whether you want this responsibility. Either choice is valid—it all depends on your preferences.

Question: Do I Or My Beneficiaries Need to Worry About Financial Penalties?

As we mentioned above, a trust brings tax advantages for those with large estates. It can also protect assets from creditors or litigation. At the same time, it’s a lot more expensive to set up, which can be a concern for those who are under financial strain right now.

You may also want to consider how beneficiaries’ financial options may be affected by their inheritance. For instance, individuals with disabilities might lose government benefits after receiving a large sum of cash. A trust could disburse the inheritance in a way that does not interfere with disability payments.

A lawyer or financial planner can look at your wishes and help you find the best way to care for your beneficiaries without incurring significant penalties.

Ensuring Your Final Wishes Are Carried Out

No one wants to think their loved ones will get into a fight over their final wishes, but it unfortunately does happen. You can help head off inheritance disputes by being intentional and specific in your will and/or trust. By taking the time to consider the details for each question raised above, you’ll be in a good place to lay out clear terms for the distribution of your estate.

The Next Step: Putting It All Into Action

Congratulations on making it through all three sections of this guide! Now that you have a blueprint for your estate plan, a lawyer can help you make these decisions official. We should note that this guide doesn’t cover everything—more questions are likely to arise as you go through the process. With the work you’ve just done, you will be more prepared to make these decisions.

Pearson Butler is here to help you handle the details and finalize your estate plan. Our knowledgeable attorneys have been working with Utah families for over 30 years. We’re known for our friendly service and honest counsel. When there’s a chance to make the estate planning process easier for our clients, we’ll take it.

Reach out to us today if you’re ready to make sure your end-of-life wishes are recorded. We can answer your questions and help you determine your next steps.

Call Pearson Butler at (800) 265-2314 for a consultation with one of our estate planning attorneys.