Gabriel Katzner - July 19, 2021 - Estate Planning
questions and answers about estate planning

In honor of Teacher Appreciation Week, which takes place the first week of May, we’d like to thank you for your time and dedication to teaching the next generation. You provide the necessary foundational knowledge to ensure the success of tomorrow’s leaders. Estate planning documents are an essential piece of planning for your success. The following are some basic questions and answers about estate planning and how estate planning, or the lack thereof, may affect your life.

What is an estate?

Your estate is everything you own, including your bank accounts, real estate, household furniture, automobiles, and other possessions. Everything in your estate can be passed on to someone else at your death.

What is estate planning?

When estate planning, you appoint trusted decision-makers to take care of your estate at your death. Your estate plan is the legal documents that you give to your decision-makers. These documents specify what you want to happen to you, your property, and your money when you die. Your estate plans allow you to make plans for your minor children as well by naming a guardian for them. You can also include documents in your estate plan that allow you to dictate what you want to happen to you and your finances in the event that you cannot make your own decisions. You can also specify your wishes for end-of-life care in these documents.

Do I really need to do retirement planning at my age?

No matter what your age, it is a great idea to plan for your retirement actively. School districts have different retirement options available for teachers. Defined-benefit plans, also known as pension plans, calculate and promise a specific payment amount when you retire. Defined contribution plans allow you and your employer (if they offer this benefit) to make contributions to your individual account. How much money you will have at your retirement depends on how well your investments do between now and then. You may need to research your various options to determine which one provides the best benefits for your situation. Consider the following factors:

  • Payment type: lump sum or installments?
  • Payment length: do they end when you die?
  • Beneficiaries: are your spouse or children entitled to any money if you die?
  • Decision-making: do you have any control of your final payouts after your death?
  • Time of death: does it matter if you die while still working, or after you leave your current place of employment, but before you retire?

There are rules and requirements for each type of account.

What documents comprise an estate plan?

After you’ve done your research on retirement plans, you should consider the estate planning steps you’ve already taken. You’re on the right track if you’ve already prepared some of the following documents. If you have not prepared any of these documents, we are here to ensure that you have a plan in place for any situation. As a teacher, you are well aware that having a plan in place makes teaching much easier. By analogy, think of your estate planning documents as lesson plans for your loved ones.

Revocable Living Trust

There are several different kinds of trusts. A revocable living trust is one that you create while you are alive. A trustee is a person or entity that manages, invests, and distributes your money and property. You can be your own trustee, or you can name someone else to be your decision-maker and act in this role, a successor trustee.

You can change the terms of your trust documents at any time throughout your lifetime. If you should become incapacitated (unable to make your own decisions), the decision-maker you appointed will manage your trust for you.

During your lifetime, you can transfer ownership of your accounts and property:

  • from yourself as an individual to yourself as the trustee of your trust
  • to your trust as a beneficiary of your accounts and property (with some exceptions)

You do not need to be wealthy to benefit from a trust. A trust enables you to act as your own trustee, have a co-trustee, or name someone to be your successor trustee. You can make decisions about how you want to use and enjoy your money and property during your lifetime while also directing what happens to it after your death. Essentially it is a great planning tool to help protect your wealth for your designated beneficiaries.

Benefits of Revocable Living Trusts

  • Ability to leave instructions for your loved ones on how to handle your money and property in the trust
  • Make plans in case you should become incapacitated during your lifetime
  • Leave property and money to younger beneficiaries with safeguards in place
  • Use trust money or property as an incentive (i.e., graduate from college, maintaining sobriety or employment)
  • Provide support for your favorite charity

Last Will and Testament

A Last Will and Testament is another option for stating how to carry out your wishes. You will assign a decision-maker, a personal representative or executor, to execute your Will upon your death, including:

  • Collect all your accounts and property
  • Pay your outstanding debts
  • Distribute your money and property to your beneficiaries
  • Name a guardian for minor children

A Will is executed upon your death. It is not helpful should you become incapacitated. Unlike with a revocable living trust, your loved ones will need to go through the probate process (a court-supervised procedure) to distribute your money and property. If you die and have not completed a Last Will and Testament, the probate court will determine how your money and property will be distributed based on state law.

Pour-Over Will

A pour-over will is a will associated with a revocable living trust. A pour-over will is used if you own an account or piece of property and have not transferred it to your trust. Transferring accounts and property can be done during your lifetime or upon your death using a beneficiary designation. A pour-over will:

  • Names a personal representative or executor (likely the same person who will act as your trustee)
  • Names a guardian for your minor children
  • Directs that property and accounts be transferred to your revocable living trust

Using a pour-over will still requires going through probate. However, your money and property will be managed and distributed in accordance with the trust’s instructions.

Financial Power of Attorney

With a financial power of attorney, you appoint a trusted decision-maker or an agent to handle financial matters on your behalf. These financial transactions may include signing a check, opening bank accounts, or signing a deed, among other things. You can write instructions and customize your financial power of attorney to limit what your agent is permitted to do and when your agent is authorized to act on your behalf. If you do not appoint a financial power of attorney, your loved ones will need to wait for a judge to appoint someone for you. Unfortunately, you will not provide any input into this decision if you do not plan ahead.

Medical Power of Attorney

A medical power of attorney allows you to appoint a trusted decision-maker to make medical decisions on your behalf if you are unable to do so. A medical power of attorney ensures that you will have the ability to communicate your healthcare wishes. If you do not have a medical power of attorney, the court will appoint one for you. The court-appointed representative may not be the one you would have chosen. The process takes time and money in an already stressful period.

Advance Directive or Living Will

An advance directive is a document that allows your trusted decision-maker to communicate your preferences for end-of-life care. Having an advanced directive means no one has to guess what you would want at an already stressful time. If your loved ones disagree on what they think you might want due to their differing perspectives, hurt feelings and arguments may ensue at this already stressful time.

Health Insurance Portability and Accountability Act Authorization Form

The Health Insurance Portability and Accountability Act (HIPAA) authorization form allows you to designate who has the right to receive health information about your medical condition. A HIPAA form designates who has the right to receive information. A medical power of attorney is a document that gives your decision-maker the authority to make decisions on your behalf. Your HIPAA destination allows your loved ones to have information about your medical care, which may alleviate their anxieties and uncertainties during a stressful period. Having this information can also help your loved ones better understand why your medical power of attorney is making the decisions they are.

As a next step, please navigate to our Estate Planning Checklist to gather all of the information you need to develop a comprehensive estate plan. You can schedule a call with us or reach us directly at 855.631.3457 to learn more about how best to plan today to protect those most important to you.

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