Attention all Baby Boomers - estate planning time is now
Many of us fondly remember the days of rotary phones, transistor radios, and 8-track tape players - we are the Baby Boomers. As we age, we know our day of reckoning is approaching, but many of us are avoiding estate planning because we believe it is the province of the wealthy. In fact, whether your estate is worth $20 or $20 million, there are documents we should all have in place to protect ourselves and our families.
For example, when you think of the will, you should think of "control." Without a will, you leave control of your estate to the Illinois intestacy laws, which will likely not meet your intentions. Often overlooked in a Will is the disposition of collections or assets of personal value - and you can't divide that precious wedding ring five ways. If a special asset is passing to a specific beneficiary, you will want to value that asset to ensure that your estate is divided equitably among all family members.
Your beneficiaries will thank you when you avoid what is known as the "estate treasure hunt" by putting together an inventory that lists all of your assets and where they can be accessed. This includes employee benefits from prior employers or special assets that are hidden away.
If you lose your capacity to manage your financial affairs, who steps in to pay your bills and manage your finances? A Durable Financial Power of Attorney answers this question. A common mistake is to rely solely on your spouse to use joint bank accounts on your behalf, because if the incapacity is long term or permanent, then your spouse is prohibited from executing certain sophisticated transactions, such as selling your home. Without this power of attorney, financial management reverts to the state, where the probate court will appoint a guardian or conservator to control the management of your estate.
Another vital document is the health care power of attorney. This empowers someone to maintain or terminate life support if you are incapacitated. Illinois provides a form found on the Department of Public Health website, but it is best to seek legal counsel before executing any documents. You will need to appoint someone to make the tough decision, maybe against the wishes of other family members. It is easy for everyone to glibly agree to pull the plug, but it can be a different story once the moment of truth actually arrives.
Finally, you will want to protect your legacy. We all would like to see our estate assets put to good use, but we also remember our days as young adults when we enjoyed the sights, sounds, and smells of Woodstock. Some of our beneficiaries happen to be at that same age. Thus, you should consider a trust if you do not necessarily trust your beneficiaries. A trust allows you to appoint a trustee to make the decisions you would have made if you had survived. Your legacy can be used to meet the beneficiary's basic living needs or for specific goals, such as tuition, a business, or a new home. It can be structured to prohibit payments to beneficiaries who fail to meet expectations because of issues such as addiction, financial immaturity, etc. Trusts provide a wide latitude to ensure that your long term goals are met.
Having legal capacity to sign planning documents is becoming a slippery slope because loss of capacity can creep up on us gradually. This issue is particularly important for our parents who may have neglected to plan, so "the sooner the better" should be our planning mantra.
• Charles F. Schultz, is partner-in-charge, estate and succession planning at FGMK LLC with offices in Chicago and Bannockburn.