Thinking Ahead: It’s never too early to start estate planning

By Jamie Swinnerton
Tompkins Weekly

Making your will can be a daunting process. Deciding who all your worldly possessions and assets will go to takes careful consideration, but a little planning can go a long way. There are a number of things that people should think about when planning their estate, and Kim Rothman, a partner with local law firm Miller Mayer, is here to help.

As with most of the things that people face as they get older, planning early always helps. When should you start planning your estate? When you decide to have kids, Rothman said.

“If you’re having kids, or about to have kids, you should have a will,” Rothman said. “The reason for that is because if you die without a will your minor children will be beneficiaries of your estate and the court will not allow, as of right, the surviving parent to be the supervisor of those funds and so you’re going to have court intervention.”

But this is not the only time that Rothman sees her clients. Typically, they will also come back when their kids are off to college, and when they retire and are thinking about the future. Sometimes, clients don’t realize the difference between estate planning, which designates where your assets go following your death, and financial planning, which makes sure your assets are sufficient to reach your objectives during your lifetime.
“The considerations that people are often thinking about at retirement age is they’ve got kids and grandkids and commonly people leave everything to their kids, sometimes they want to include spouses of kids or grandchildren directly as beneficiaries,” Rothman said.

Sometimes issues like debt or divorce mean it wouldn’t be a great idea for some people to get assets outright. For these situations, Rothman said trust plans can become part of estate planning.

Rothman has traveled to hospitals to meet with clients about estate planning, but the situation can be much less stressful if the planning is done before the possibility of a health crisis.

“The worst-case scenarios, and I’ve done this a couple of times in my career, is when somebody has a health emergency and they’re up at the hospital and I go up and meet with them at the hospital and they’re trying to scramble around and get things together while they’re trying to deal with a health emergency, and that is something that you should avoid at all costs because it is really stressful,” Rothman said. “It is not what you want to be thinking about at that time.”

Thinking about how your assets are going to pass is the big question. Often, spouses will have joint accounts, and after one spouse passes the other will automatically become the owner of that account. In this case, a will is unnecessary to distribute those assets.

“Sometimes when couples come to me and they’ve got everything structured jointly except one thing, we’ll talk about that one thing,” Rothman said. “If it’s a bank account, is it appropriate to make it a joint account? Could you use beneficiary designation and trust designation on the account to make it automatically flow to the survivor?”

Thinking about the designation of assets early can make it easier on the surviving spouse. Good planning can avoid possible court intervention and assure that your possessions and assets go directly to the beneficiary that you want.

“Often times people won’t know about those things until we’ve met,” Rothman said.

To make the process of estate planning easier, Rothman said people can begin to get their financial house in order before coming to her. This means getting information about that retirement account you had 30 years ago, having contact information for beneficiaries, knowing where your assets are, and deciding designation for bank accounts, among dozens of other considerations. The first thing that her office typically does for a client is offer a questionnaire of things to think about and look for to help get this process started. But planning your estate when your assets are scattered around drags the process out.

Piecemealing together a plan through an attorney can also make the process of estate planning difficult. Often people will add one of their children to their accounts, or give them power of attorney, in order to pay bills and make certain decisions. This can complicate the estate planning process if the parent wants their estate divided equally between several of their children.

“It creates a bit of a mess after the person dies if they just were adding the child for administrative ease while they were alive, now that child becomes owner of more than their share,” Rothman said. “In lots of cases it’s fine, everybody gets along and the child who got more contributes back to other siblings. But, in some cases that doesn’t happen and it causes strife.”

Rothman suggests thinking about power of attorney and healthcare proxy decisions during the estate planning process, as well. Making sure that the person in charge of making these decisions knows what you want is important.

“They can be more important for your own well-being than your will,” Rothman explained.

For those interested in leaving money to charity while planning their estate, Rothman has advice to make sure your charity of choice gets the most out of your donation.

“A really good source of charitable giving is tax-deferred retirement accounts,” she said. “Like 401ks, 403bs, IRAs, anything where the participant has contributed tax-deferred dollars and they have to pay income tax when the money comes out.”

Charities do not have to pay income taxes, so the charity that these assets are left to get 100 percent of the account. Another upside to leaving these accounts to charity is the ease the account holder has in changing the beneficiary. No need to change your will if you decide to give to another charity, just fill out a form.

As with most things, estate planning is easiest if done early. All you need is a little thinking ahead.