“Life is what happens when you’re making other plans.”– JOHN LENNON
This rings true no matter what stage of life. If we’ve learned anything during this COVID-19 era, it is that it’s impossible to predict and control the future. Life just happens. Circumstances change, priorities evolve, and unexpected events can arise when we least expect them. While we can’t predict the future, we can prepare for it.
Your crystal ball is likely as good as the next guy’s, which is why it is important to have documents in place to ensure your wishes are known and your loved ones are protected while navigating life as it happens.
Just as importantly, estate planning is not only about deciding what happens to your assets—it is also about deciding who will carry out your wishes. A well-drafted estate plan is only as effective as the people or institutions entrusted to implement it. A thoughtfully designed plan can provide peace of mind knowing the right people, or institutions, are in place when they are needed most.
With that said, you may think estate planning doesn’t apply to you: you aren’t old enough or you don’t have an “estate” or significant assets… so there’s nothing to plan. Well, if you’re over the age of 18, please think again.
IN YOUR 20’s:
Once you turn 18, your parents no longer have authority to make health or financial decisions for you. Advance Directives are a set of important documents that you should have regardless of your financial circumstances.
ADVANCE DIRECTIVES
POWER OF ATTORNEY: This document delegates authority to an “agent” to handle financial matters on your behalf. The functions that your agent can perform may be general or specific depending on how much authority you wish to grant to your agent.
HEALTH CARE SURROGATE DESIGNATION: A Health Care Surrogate is an individual who you specifically grant the ability to make medical decisions on your behalf. This document is only used in the unfortunate event you are unable to make your own health care decisions. If you are able to communicate your wishes to your health care providers, the Health Care Surrogate Designation is not used.
LIVING WILL: Unlike a Last Will and Testament, a Living Will is effective while you are alive. It is a legal document that spells out medical treatments you would and would not want to be used to keep you alive, as well as your preferences for other medical decisions, such as pain management or organ donation.
Why are these important?
In sum, the pragmatic answer to this question is: peace of mind. In the unfortunate event you are deemed unable to make financial or medical decisions, but a decision must be made, these documents will come into play to reflect your wishes and designate who will make these decisions on your behalf. Advance Directives avoid the need for a guardianship, save time and money, and ensure the person you would trust to make these decisions knows your wishes and is able to serve in that role.
By way of example, let’s follow Sue: She is a 26-year-old driving home from work. She gets in a car accident and is taken to the hospital. A myriad of situations can arise. Worst case scenario, Sue cannot make medical decisions for herself because complications occur and she’s not able to consent to a procedure.
If she did not designate a Health Care Surrogate, family members may disagree about how her doctor should proceed. Sue may also have wished that her longtime significant other, who works in the medical field, make the decisions. This does not only delays decision-making, but also detracts from the possibility of her actual wishes being carried out.
IN YOUR 30’s:
Personal and financial circumstances typically shift in your 30s. You may own a home, may have gotten married, started a family and grown your assets. To make sure your spouse, children and assets are protected, it is an important time to discuss with an attorney which legal strategies to employ to best serve your goals.
LAST WILL AND TESTAMENT (“Will”): A Will directs upon your death who will inherit your assets, who will be in charge of settling your estate and, if necessary, who will care for your children if you and your spouse are unable to.
TRUST: A Trust transfers ownership of your assets to someone you choose (called the trustee, who in many cases may be you) and dictates who will manage your assets for the beneficiaries you designate. Trusts can hold different kinds of assets, such as real estate and investment accounts. Trusts can also be set up in many different ways. You may have heard of Living Trusts, Revocable Trusts or Irrevocable Trusts.
Why are these important?
Peace of mind that your loved ones will be taken care of after your passing and ensure your hard-earned assets will be managed in accordance with your wishes.
Sue made a full recovery and is now 33 years old, married, and a proud mother of her one-year-old son, Jimmy. She wants to make sure Jimmy is taken care of in the event she and her husband are not able to care for him. Sue would like to designate her brother and sister-in-law as Jimmy’s legal guardians in the unfortunate event that she and her husband are unable to care for him.
What happens if a Last Will and Testament or Trust is not prepared?
If Jimmy receives an inheritance because both Sue and her husband have predeceased him, a minor guardianship will need to be established for Jimmy who has not yet reached age 18.
A minor guardianship is a court process that appoints individual(s) to have legal authority and a duty to care for a minor’s person and/or property (this may be the same person). Without a Will in place stating who Sue would like to assume these roles, it is up to the court process to decide who would be Jimmy’s legal guardian(s) in this unfortunate situation.
How can a Will or Trust help?
Sue can nominate her brother and sister-in-law in her Will to serve as Jimmy’s guardians and provide for his custody and care if she and her husband are unable to do so. If Sue establishes a trust for Jimmy, she can avoid the need for a minor guardianship over his inheritance while providing a framework for how and when assets will be managed and distributed for his benefit. She must also decide who will serve as trustee and carry out those responsibilities. Serving as trustee involves significant fiduciary duties, including investment oversight, tax reporting, recordkeeping, and making distributions in accordance with the terms of the trust.
IN YOUR 40’s:
If the above documents are in place – congratulations! It may be a good time to review them to make sure they are still current. If not, it’s important to catch up.
Sue and her husband are now in their 40’s. Their assets have grown, and they decided to update their existing documents. Sue would like to make a charitable donation to the hospital that helped her in her 20’s.
Sue also remembers what it was like to be 18 years old and thinks it’s a good idea for Jimmy’s inheritance to be held and protected in a trust, with her brother serving as trustee and managing the assets for Jimmy’s benefit. Sue would like the trust to assist Jimmy as he navigates his 20’s. The trust instructs the trustee to make disbursements to help pay for Jimmy’s schooling, rent, medical bills, etc., while giving her brother (as trustee) authorization to make these disbursements at his discretion. The remaining trust assets will be distributed, in their entirety, to Jimmy when he turns 30 years old, ending the trust.
As Sue’s estate grows, she begins to think about the long-term administration of the trust. While her brother is willing to serve as trustee today, she recognizes that circumstances can change. He may relocate, become unable to serve, or simply no longer wish to assume the responsibilities associated with trust administration.
To provide continuity, Sue discusses naming a corporate trustee as either trustee or successor trustee. A corporate trustee can provide professional administration, objective decision-making, and ongoing oversight while carrying out the instructions outlined in her trust.
IN YOUR 50’s and 60’s:
At this juncture, your familial, personal and financial realm has likely expanded. This is a critical time to get documents in place, if you have not already, as well as a good time to review and update existing documents.
Sue’s son, Jimmy, is now a legal adult, and her new goal is to avoid probate. She contacts her estate planning attorney to discuss what she can do proactively to make the transfer of her assets at her passing as simple a process as possible for her loved ones who survive her.
As part of that planning, she also considers a corporate trustee to help relieve family members of the responsibilities associated with trust administration, investment management, tax reporting, and beneficiary communications.
IN YOUR 70’s AND BEYOND:
At this stage, with your estate plan complete, the focus should be on reviewing and updating your documents as appropriate.
This is also an appropriate time to confirm that the individuals or institutions named in your documents remain willing and able to serve in their designated roles.
In sum, life happens, and circumstances (like Sue’s) change throughout the years. Having documents in place provides clarity to loved ones, ease of carrying out your wishes and peace of mind that even though “life is what happens when you’re making other plans,” you have your plan and are prepared for the life that happens.
Thoughtful planning includes not only deciding what should happen, but also choosing who will be responsible for carrying out those wishes when the time comes.
WHEN DOES A CORPORATE TRUSTEE MAKE SENSE?
Depending on a family’s circumstances and goals, choosing the right trustee can be just as important as creating the trust itself.. A corporate trustee may be worth considering if:
- You do not have a family member or friend who is willing or able to serve as trustee.
- You want professional investment management and trust administration.
- Your trust is intended to last for many years or generations.
- You have concerns about potential conflict among family members or beneficiaries.
- You would prefer an impartial fiduciary to make discretionary distribution decisions.
- Your estate includes complex assets, significant wealth, or charitable planning objectives.
- You want continuity and stability, regardless of changes in individual circumstances.
- You wish to relieve loved ones of the administrative responsibilities that come with serving as trustee.
A corporate trustee serves as a fiduciary, meaning it is legally obligated to act in the best interests of the beneficiaries and administer the trust according to its terms. Unlike an individual trustee, a corporate trustee does not retire, relocate, become incapacitated, or pass away.
For many families, the decision is not whether a loved one is trustworthy—it is whether they should bear the responsibility. In the right circumstances, a corporate trustee can provide experience, objectivity, and continuity while allowing family members to remain family.
