Chapter 5

Estate Planning

A man’s dying is more the survivor’s affair than his own.

Thomas Mann

Planning one’s estate is not thought of as a pleasant task. After all, it forces a person to face his or her own mortality. It is, however, a useful and necessary task. It can also be personally satisfying. Estate planning is not about the person planning because he or she will not be around to know the difference. Instead, estate planning is a task that is done for family, for heirs, and for those that a person loves and cares about. An estate plan can be as simple as a will or can involve a will, trusts, contracts, and named beneficiaries. It depends on how much a person owns and how complex his or her wants are.

People should probably dust off their estate plan every 3 to 5 years or whenever they have a major life change. As their estate gets more valuable and complex, people will seek out lawyers who deal with estate planning issues. People often forget what they put into their plans. Circumstances also change quickly. Their retirement savings or value of a practice may have blossomed over the past several years. They may have had additional children, divorced or remarried, received another inheritance, or changed insurances significantly. All these can affect how a will and estate plan are structured.

Purpose of Estate Planning

Planning an estate will accomplish several purposes.

To Be Sure Who Gets What

A person may have a special gold watch or Aunt Tillie’s flower vase that he or she wants to go to a particular child. Although not trivial (in fact, these decisions are often the most contentious), the decision takes on added importance when significant amounts of money are involved. This money may be from assets owned, proceeds from insurance policies, retirement plan proceeds, practice sales, inheritances, or countless other sources. If a person properly plans his or her estate, he or she will resolve conflicts, reduce squabbles between family members, and assure that assets will be distributed the way intended.

To Give Beneficiaries Protection and Guidance

A person may be the primary source of family income and financial expertise. If he or she dies, beneficiaries may need help in managing the family finances or other affairs. A person may want to appoint a banker or other trusted advisor as the trustee until family members are old enough to mange their own affairs. Through estate planning, a person can assure that beneficiaries are protected from fraudulent advisors and kept from squandering the money earmarked for a particular purpose.

To Provide for the Welfare of Minor Children

If a person has minor children, he or she has a special estate planning problem. If the spouse is still alive, he or she will naturally take care of any minor children. However, if both die (e.g., in an accident), then the problem suddenly becomes enormous. Not only does the child have to cope with the parents’ deaths, but they also must forge new parent ties. A parent needs to ensure that someone will be the guardian for the children until they reach the age of majority, when they can legally manage their own affairs. If a person does not have someone selected ahead of time, then the state will appoint someone. That may not be someone in whom the parent has trust or confidence. This person needs to provide both the emotional and financial guidance that would have been provided. (The potential guardian should be asked before named.) Unmarried siblings or couples may not be the best choice if they are not tuned into raising children. Elderly parents may want the responsibility but may not be physically able to parent children now and until the youngest child is 18. If a person is divorced, remarried, or part of a blended family, additional legal problems develop concerning visitation and support. The more that can be ahead of time, the more service will be providing for the family.

To Help Guide the Executor (Administrator)

An executor (sometimes called the administrator or personal representative) is the person responsible for collecting information, paying bills and expenses, seeing that assets are distributed properly, and generally marshaling an estate through the probate process. Being an executor is a thankless job. Relatives and creditors all try to influence the executor. In addition, there is simply much hard work to do, selling assets, having other assets appraised, paying bills, closing credit card and other accounts, and keeping everyone informed of the process. Executors can be paid (from the estate) for their work. The executor is named in the will. The estate planner should think about who would do these duties best and should ask that person ahead of time.

To Eliminate Delays and the Expense
of Probate Administration

Probate administration takes many months, or even years, to complete. This happens especially when the estate is not well planned. Lawyers then bicker over who gets what and who deserves which assets. A well-planned estate reduces these delays and expenses. During the time that the estate is in probate, the assets are essentially “locked up” until they are distributed. This can be a problem if family members or other heirs need that money to live on. In this case, a person needs to be sure to provide sufficient liquid assets outside the probate process for their support.

To Plan for the Business Transition

If a person is the owner of a dental practice or other business, he or she has another special estate planning problem. That problem is that the value of the practice drops quickly if the owner is not present seeing patients. An owner should have a plan for what happens to the practice in case of death or disability. If a person is in a group practice, he or she may have cross-purchase agreements to cover the eventuality. If a person is a/>

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