Estate Planning BasicsEstate planning basics require time and energy, but being proactive is so important. This is more of a personal blog. Over the years, I have spoken to well over a million people, and many of my “seminar friends” know my story. I have spent many months of my life in the hospital. Once it was a 6 month stretch in an isolation room. When you are in a hospital, your perspective changes on many things. What is truly important in your life quickly comes into focus. For me it was my love of my family and how to care for them.

My love for my family may explain my career focus on estate planning basics. Last week my 5 year old granddaughter was fine, but by Friday late morning she was headed to the hospital. We didn’t know what it was but it was obviously serious. When I caught up with her at the hospital, she was being pulled around in a wagon for tests.

The first CT scan showed a little brain swelling. Her chest X-ray was normal. I held her on the scale while the anesthesiologist got an exact weight. She moaned pathetically when I picked her up out of the wagon. She was mostly “out of it.” I was amazed the next day when she remembered me walking by the wagon and then picking her up to get her weight. The lumbar puncture drew a lot of spinal fluid out of her spine. It was clear. The one hour examination showed no foreign proteins, and normal chemical levels. The doctors suspected spinal meningitis. One doctor commented that our granddaughter’s best chance of survival came because our daughter had been immunized.

The 48 hour culture wait began. It was hard on us all. They started her on intravenous antibiotics. The 64 dollar question was is it virus or bacterial? Bacterial meningitis is fatal in about 3% of 5 year olds. In the others it causes damage, blindness, deafness, paralysis. You can use your imagination to what we were thinking. Viral is just a “let the body handle it” thing, but almost never fatal and not many long-term side effects. She started to respond to the treatments within hours. She could open her eyes and talk some.

Isolation procedures went into effect. (I know those procedures – mask, gown, gloves.) By Sunday, the doctors said she was doing much better. We had been blessed. The worst was over. She had simply won a 2 week stay in the pediatric ward isolation unit, but it was caught early and no damage was done.

The moral of the experience is, take time to love the kids, grand kids, parents, and spouses, because things can change real fast. In a moment anyone you love could be gone. I hate to put a legal slant on the experience, but for your sake, I will. Take time to get your estate planning basics in order.

Estate planning basics include your will, your trust, your durable power of attorney and living will. Obviously, if the granddaughter had died, it would have devastated us, especially grandpa. If the head of household dies, it is devastating to all of the family. The same emotional devastation we would have suffered with our granddaughter’s loss. But, with a head of household or even the spouse, there is a huge financial devastation. Having the estate planning basics in place can help your loved ones avoid the “worldly” devastation that comes with a death.

With our granddaughter’s situation, we had to rely on the professionals to complete the diagnosis and treatment. With your estate planning basics, you can be a lot more hands on. You can even do most of it yourself, if you are inclined to be a “do it yourself er.” My book Protecting Your Financial Future is specially designed to make this important legal topic easy to master. It is not a boring legal book, but a friendly guide.

With estate planning basics you’ve got to make your own diagnosis and get it done. Do not let the financial planners and attorneys take a “let’s wait and see” attitude. Life is uncertain and I can tell you from experience that having your estate planning basics in order will make all the difference. It is a duty of love you owe your family.

  1. I really liked your point about being proactive in estate planning. It seems like estate planning takes a lot of work, but it’s a lot less time consuming and difficult if you keep working at it over the years. Planning out your estate may take time and effort, but it’s definitely necessary to get it done for your family financially.

  2. I loved your suggestion to take the time to get the estate planning done. Like you mentioned, things can change quickly so it’s important that your estate is all settled. It may help to create an estate as early as possible then make changes as needed along the way.

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Estate planning basics include four essential elements—the will, the revocable living trust, the living will and the durable power of attorney.

Estate Planning Basics

Build from ground up.

Just like you can’t build a house from the roof down, you can’t build a good estate plan from the roof down. You need to build a foundation of the estate planning basics using the four essential elements first.

Think of the wealthy people you know. Does it seem like the wealth just flows to them? Could that be? The answer is yes. The truth is that in every business, those with the most wealth are the ones that don’t have any fear. They have the courage to succeed. Why are they fearless? They have their estate planning basics in place. They have the will, the revocable living trust, the living will and the durable power of attorney set up, and they are on solid footing.

To be successful, estate planning basics must be structured using an understanding of the legal strategies associated with wealth accumulation. Unfortunately, many people try to put a will in place but they don’t have a complete picture of how the estate planning basics are used. Others are “taken to the cleaners” by less-than-competent planners and lawyers. These lawyers may give them the will, the revocable living trust, the living will and the durable power of attorney, but then they fail to educate their clients, on how the basic elements work together.

Let’s take a look at these estate planning basics. If you understand the elements and know how to use them, your chances for financial success are much higher. If you and/or your parents don’t have the four elements in place already, it is time to get moving. If you already have the will, the revocable living trust, the living will and the durable power of attorney in place, learn how to use them. It’s worth every effort you make and every dime you spend getting the foundation in place. Here’s a basic overview of the four tools:

Estate Planning Basics # 1—The Will

Everyone needs a will. Even if you have a revocable living trust, you should have a will. It is the first element of the estate planning basics. The will directs the judge how to distribute your estate after you die. First it will name your personal representative (the executor or executrix). This is the person who will manage your affairs after you die. It is a good idea to name a family member who is geographically near the bulk of your estate, has good business sense, and can be fair with your heirs. You could also name a bank. It is malpractice for your attorney to be named as the personal representative.

The will also names the guardian for your minor children. This is so important. It is very sad to see what can happen to children when their parents fail in this first of the estate planning basics. A good will should put restrictions on the guardians. Many wills just have the clause that only reads, “John and Mary guardians to my minor children.” It is so much better to say, “John and Mary; provided they raise the children in the state where the children are living at the time of my death.” Or, “John and Mary; provided they are still happily married and harmoniously living together.” Or, “Grandma and Grandpa; provided they have the health to take care of the kids.” You get the idea.

Just because you have a will, that doesn’t mean your estate planning basics are in place. You still need the other three elements. The next is a Revocable Living Trust.

Estate Planning Basics # 2—Revocable Living Trust

The revocable living trust is a powerful element of the estate planning basics. It enables an estate to have a smooth transfer of property by avoiding probate, and also get twice the estate tax exclusion. It can also help provide some anonymity to help avoid lawsuits. You may have heard an attorney say you don’t need a revocable living trust. There is an argument in the legal profession between the standard will and the living trust. I come down in favor of the revocable living trust. In my book Protecting Your Financial Future, I go through the pros and cons in detail. The bottom line is that a revocable living trust will help you save time, money, and the headache of probate when it is correctly managed.

The revocable living trust can have problems—not with the trust, but with the user. The revocable living trust has to be maintained, and it must be correctly funded. It must “own” all of your property. It isn’t hard to manage, but it is seldom that a lawyer takes the time to teach you how to manage your trust. In reality you can’t afford to pay the lawyer to manage it for you. As a result, a majority of people who get a revocable living trust don’t benefit from the trust. The revocable living trust must also “overlap” with a durable power of attorney.

Estate Planning Basics # 3—Durable Power of Attorney

If you are putting estate planning basics in place, you need a durable power of attorney. This document allows you to appoint a representative to control your property when you are unable to do it yourself because of incompetency. I have seen people of all ages, not just old people, fall victim to incompetency. This means you don’t wait until you are old to put the durable power of attorney in place.

It is true that a revocable living trust should have a provision that lets your successor trustee manage the trust property if you, become incompetent. However that only takes care of trust property. What about your personal and business affairs? The durable power of attorney lets you appoint a representative to manage all of your other business and personal affairs when you can’t do it. The durable power of attorney should be written so your representative cannot just take over. Power shouldn’t transfer from you until the criteria outlined in the document are met, and then there is an automatic transfer of power. Note also that any power of attorney, durable or not, ends immediately if you die. At that point, your living revocable trust becomes irrevocable and your successor trustee and the personal representative in your will take over.

The durable power of attorney prevents messy court proceedings required to name a guardian/conservator for an incompetent individual. The emotional and financial drain of such proceedings when a family member has an accident or gets sick is the last thing the family needs. The durable power of attorney prevents all of the legal problems at a time of crisis, when you become incompetent.

Your durable power of attorney should also include a section addressing your desires for your health care. This is a durable power of attorney for health care, which allows your “representative” power to interface with the medical industry. With the new HIPAA laws in place, you may not have a hard time getting what you want in a hospital, but it will be very difficult for your spouse or children if you are suddenly unable to direct your own medical care. The durable power of attorney for health care can be part of your durable power of attorney or it can be a separate document. Note this deals only with your medical treatment, not the right to die, which is addressed in another of the estate planning basics—the living will.

Estate Planning Basics # 4—Living Will

A living will is the one of the estate planning basics. It directs the doctors to keep you alive or pull the plug. Everyone needs one. The best place to get the document is at your local hospital. Hospitals like their own document rather than the very expensive 30 page document you get from your lawyer. This is because the hospital attorneys wrote the hospital living will document. Hospitals give them away free. They will usually have you sign their living will before you enter the building. Go ahead and do it. That way you can make your choice.

These four legal documents form the elements of the estate planning basics that all wealthy people use. They always have these elements in place. They are what I call the “basic tools of wealth.” Start using them today and it will be worth every effort you make and every dime you spend.

These tools are described in detail in Protecting Your Financial Future.

By Lee Phillips

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