Many times people will tell me they don’t need to prepare estate planning documents because they don’t have an “estate.” My response is simply, “you don’t have to have a significant amount of assets to need an estate plan.” Take a moment to ask yourself the questions below to see if you need to consider putting together an estate plan or updating an outdated estate plan:
Do you have current estate planning documents?
1. A Revocable trust that properly addresses changes in familial relationships, financial status, and changes in the law, e.g. the recent appeal of the estate tax.
2. A properly executed pour over will if you have a trust or a simple will if you don’t have sufficient assets to justify a trust. Even if you don’t own a significant amount of assets, having a properly executed will in place can assure that what assets you do have are distributed according to your wishes.
3. Medical directives and powers of attorney specific to your jurisdiction. These documents are especially important and really have nothing to do with the amount of assets you own.
4. Nomination of a guardian for self, estate, and minor children. Again, these nominations have nothing to do with the size of your estate, but have everything to do with properly providing the appropriate individuals to take care of you or your children in the event you are unable to do so yourself.
Are you a business owner?
5. Are you operating as a sole proprietorship? If so, are you properly insured (life and disability) and protected from frivolous liability? Are you performing the legal formalities necessary to achieve limited liability in the event you are operating via a limited liability company (LLC) or limited partnership (LP)? Do you have a contingency plan in place that provides for the management or distribution of business assets in the event of your death or incapacitation? Operating a business through a legal entity has tremendous advantages; however, one must make sure that the entity is maintained properly or such an entity may not provide the expected benefits when the time comes (i.e. do not comingle personal and business assets, have an operating agreement in place, maintain adequate insurance).
6. Do you have partners? If you have partners, it is highly recommended that an operating agreement be in place and that a properly funded buy‐sell agreement accompany the operating agreement. These documents should address liquidation rights, rights to first refusal in the event one partner sells his/her interest in the entity, succession planning, etc.
Are you concerned about asset protection and special needs planning?
7. Do you have a developmentally disabled spouse, parent, child, grandchild or has there been a recent death in the family? It may be important to form a Special Needs Trust to allow a disabled loved one to be able to receive an inheritance from you without hindering his/her chances of receiving governmental assistance. It may also be important to protect yourself from potential creditors of your loved one by putting the proper legal entities in place to hold assets.
8. Do you have any of the following: Children from a prior marriage; a spouse with children from a prior marriage; step children; concerns about children’s spouses; plans of marriage on the horizon.
All of these issues may affect the current estate plan you have and place and should be examined on a case-by-case basis. As you can see, some of these issues have nothing to do with the amount of assets you own or the size of your estate. Everyone should take the time to at least ask themselves: Who will take care of my kids or me, and how, in the event I am not able to care for myself? Asking such a questions may help you realize the importance of putting in place an estate plan that is specifically tailored just for your needs.
-Attorney Robert Morris