Estate Planning 101

If your eyes glaze over at the phrase “estate planning,” rest assured you’re not the only one. Fortunately, our friends at Trust & Will — whose end-of-life planning services are available at no cost to eligible Haven Term policyholders , via the Haven Life Plus bonus rider — know how to make it interesting — and, dare we say, fun. In fact, they recently demonstrated this in an online webinar, open to customers of both Haven Life and Trust & Will.

If you missed it, fear not: we recorded it for posterity. But in case you’re in a hurry, or are the kind of person who’d find any webinar to be a cure for insomnia, we also took very good notes. Here are the five key takeaways from that webinar, Estate Planning 101, including what documents you need, the differences between a will and a trust, and more.

1. What estate planning is (and why it matters)

“Estate planning is preparing today for what happens tomorrow,” as Patrick Hicks, general counsel for Trust & Will, puts it. Think about it: You check the weather report at night to see if you might need a jacket in the morning. Estate planning is kind of the same thing — except that rain (by which we mean your demise) is inevitable, so you want to make sure you have a coat (by which we mean legal documentation of your wishes).

More on that in a minute, but back to why it matters. Going back to the weather metaphor, estate planning is all about being prepared and protected. You want to make sure your assets are transferred to your loved ones, both to avoid costly and unnecessary fights and taxes, and to make sure those loved ones are taken care of in case you’re not around to help foot the bill. (If you pay for rent, mortgage and/ or groceries, ask yourself who would do so if you weren’t around.)

Other concerns might include:

• Who will serve as a guardian for your children or other dependents?
• What should happen if you’re alive, but incapacitated?
• What kind of legacy do you want to leave — including donations to philanthropic organizations?
• If you have a business, who takes over if and when you’re not around?

Think of estate planning as your best chance to answer those important questions before it’s too late.

2. Estate planning documents

If Benjamin Franklin were alive today he might add paperwork to his list of life’s certainties, along with death and taxes. And it turns out that paperwork can help with both the death and the taxes.

So what kind of paperwork do you need? “Ultimately, what you need depends on your situation,” Hicks notes. In other words, the documents you might need will depend on your needs and objectives. If you own a business, for example, or have an especially complicated estate, you might need more specialized documentation than others.

That said, Hicks notes that most people typically need one or more of the following:

• Health care documentation
• A will
• A trust

Health care documentation might include power of attorney, an advanced health care directive, and HIPAA Authorization. Here’s what each of those do:

• Power of Attorney: Designates someone to make non-medical decisions for you, in the event that you are unable to do so yourself
• Health Care Directive: Specifies your health care preferences (such as whether you should be resuscitated) and designates someone to make medical decisions for you, again in the event that you are unable to do so yourself
• HIPAA Authorization: Authorizes your doctors to communicate with those named in your plan. (Normally, medical information is considered private. This document designates who you allow to discuss your conditions with a doctor.)

Combined, these three documents are important to estate planning, especially if you find yourself in the unfortunate position of needing medical care that you are unable to direct yourself. But what about the others — a will and a trust? What are they, and when might you need them?

3. Will versus trust: What’s the difference?

As you might guess, Trust & Will has expertise with trusts and wills. (It’s not just a clever name.) Hicks carefully explained the differences between the two. Here’s what you need to know:

What a will offers

• Simpler documents
• Names guardians for kids and pets
• Designates where assets go and specifies final arrangements
• It goes through probate after death. (Probate is an often-costly court procedure that validates the will and formally appoints the will’s executor.)
• It has limited control over distribution

As Hicks notes, the functions of a will are so essential that, if you don’t have one, the state will make these decisions for you. And as Hick points out, there’s no guarantee that the state will make the same choices you would. As an example, Hicks says that some states might divide your assets evenly between your spouse and children, rather than giving it all to a spouse who can then pass it on to your children — a potential outcome that can leave your loved ones in a financial bind.

What a trust offers

• Greater control over when and how assets are distributed, including while you’re still alive
• Minimizes or avoids the probate process entirely
• Has an impact while you’re alive and when you pass

As Hicks puts it, a trust is a three-way relationship between:

• The settler (the person whose assets are in the trust)
• The trustee (the person who holds and manages the assets)
• And the beneficiary (the person who will receive the assets)

At first, all three roles might be played by the same person. But over time, you might shift things so, say, a spouse is the trustee and your children are the beneficiaries. This helps you adapt to your life situation as you age, or even pass away.

A trust also avoids probate, the costly court process that can meaningfully reduce the total assets you pass on.

Finally, because a trust can be used while you’re still alive, it can be used to shift resources to your spouse and/or children in the event that you are alive, but incapacitated. Note that there are different types of trusts, with revocable living trusts being the most common. Learn more about the different types of trusts here.

Whichever you choose (or if you choose both), note that eligible Haven Term policyholders can enjoy one individual or couples trust, will or guardian plan at no cost — normally up to $699 — from Trust & Will, via the Haven Life Plus bonus rider.

4. How to choose the right plan

Here’s what Hicks said when discussing the conditions that might make a trust advantageous:

If you have younger children

A trust gives you more control over when and how assets are distributed. For example, you might arrange for your children to receive your assets when they reach a certain age. Or you might want to choose staggered distributions. (For example, your child gets a certain amount of dollars at age 18, then another sum at age 21.)

With a will, your choice is more binary: Either leave your assets to someone or don’t, and then hope your wishes are followed after that.

If you have a complex family

If you have a blended family or multiple marriages, a trust can help you provide for your spouse and preserve an inheritance for your children. Again, the law of your state might not reflect your wishes, especially in such a complex situation, so clarifying things via a trust can help.

“A trust can let you benefit your spouse for your lifetime,” Hicks says. “And then specify that after your spouse’s lifetime, assets go back to ensure that your kids are protected, so you don’t have to worry about leaving everything to your spouse and then your spouse getting remarried, and the assets distributed out through that new marriage, or even your assets getting passed on to your spouse’s children [or] your stepchildren, and leaving your children with absolutely nothing.”

If you have privacy concerns

Simply put, wills become public via the probate process. Trusts, however, remain private.

Now, you might be thinking that your life isn’t exactly tabloid fodder, or that you don’t have millions of followers on social media. But privacy isn’t just for the ultra-famous. You might not want certain relatives to learn the size of your estate (or who is inheriting it). This can lead to hurt feelings or worse.

If you have high asset levels

We’ve already talked about the costs of the probate process, and alluded to the cost of estate taxes. As Hicks notes, the federal estate tax threshold is very high, but some states have a lower threshold, which might mean you (or really, your beneficiaries) have to pay that tax when you die. A trust can help reduce or eliminate that tax requirement. You might also receive tax benefits through charitable donations, and Hicks adds that “a trust may provide a tax-advantaged way for you to distribute retirement savings over time.”

It’s complicated, but you can work with Trust & Will on your options if these issues concern you.

5. Who needs an estate plan

By now, you’ve probably figured out that just about anyone who won’t live forever needs an estate plan. (Sorry, that means you.) But just to bring the point home, here’s who Hicks mentioned specifically:

• Everyone over the age of 18
• Typical motivators include getting married, having children, accumulating assets, and/or experiencing medical concerns
• Your plan should evolve as your life does.
• Reasons to update a plan: Births, deaths, changes in marital status, the passage of time
• As children become adults, they need their own plans, too

Fortunately, Trust & Will makes it easy to create — and update — a plan. In fact, you can create a legally binding will or trust online in about 20 minutes. And again, eligible Haven Term policyholders can do so for no cost through the Haven Life Plus bonus rider.

Which reminds us: We’d be remiss if we didn’t mention that getting life insurance, which provides financial protection for your loved ones in case you’re not around to pay for things, is a crucial part of end-of-life planning. Not sure where to start? Getting a quote is a great first step.

Once you take care of all that, congrats: You’ve passed Estate Planning 101.