Who makes a good choice? “It’s hard to generalize,” says Shote. “In my own case, I named a professional advisor and a colleague at work to serve as co-trustees. That way, I know that they have to agree on any decisions, which gives me some additional comfort.”
A POWER OF ATTORNEY. Your estate plan should include measures to protect you and your assets if you can no longer manage your own affairs. Such “incapacity planning” usually begins with a “durable” power of attorney, a document that names an agent, someone who can take charge by signing checks, paying bills and making other financial decisions on your behalf. (The durable power of attorney can name more than one agent, stating whether they may act singly or if they must act in concert.) Virtually every state recognizes a durable power of attorney, which remains in effe
ct if you, the principal, become unable to supervise matters.
As a safeguard, you might consider having your document declare that the power will go into effect only if you’re judged incompetent by more than one doctor, including your personal physician. Such contingent powers are called “springing” powers, also accepted in most states.
COORDINATE YOUR ASSETS. You may have the best estate plan money can buy, yet not have your property distributed to whom you want in the most tax-efficient manner. Most people believe that a will controls the ultimate distribution of all their assets. According to Cheryl Creuzot, nothing could be further from the truth. How property is tided can result in its distribution outside of what the will directs.
For example, many stock brokerage accounts are titled as joint tenants with rights of survivorship (JTWROS). This titling results in the immediate transfer of the account upon death directly to the surviving joint owner. Similarly, many assets are distributed in accordance with beneficiary designations. For example, life insurance, retirement plans and annuities are distributed directly to the named beneficiary. In many instances, there is a lack of coordination between the titling of assets and beneficiary designations, and the plan outlined in the will. This can result in the will having insufficient assets to take advantage of tax-saving strategies that it was designed to accomplish.
AN ACTION PLAN, Getting the results you want also may require some “inheritance planning” for your heirs. If you leave hundreds of thousands of dollars to a spouse who has never handled large sums of money, will he or she be prepared to manage it well? If you leave an apartment you own in California to your son, how will he manage to oversee it from his home in Michigan?
To avoid a sticky situation, tell your heirs what you’ll be leaving them, and why. Ideally, you should go over your estate plan with each heir. That isn’t always practical because of personality dashes. If that’s a concern, include a professional advisor (lawyer, accountant, financial planner) in such meetings. That makes the meeting more businesslike and may help keep your heirs from being touchy about certain subjects.