Essential Steps for Taking Care of Yourself and Your Family


As you address your financial concerns during your lifetime, you should also address what happens if you die or lose capacity. No matter your financial circumstances, there are important estate planning documents everyone should have.

Estate Planning Documents for Everyone
Estate planning is not just for older generations. In fact, almost everyone should have basic documents in place.

These documents include a will, powers of attorney and a healthcare directive. They may also include a trust document and beneficiary designations. This is especially true if you have young children or other dependents, like parents or siblings who look to you for financial support.

The most important step is to put your documents in place now. You are never too young to be in control of your decisions, and the directions you provide now in your will or other documents can always be changed. But if you have no estate plan in place at all, the courts take control, and the legal processes can be costly and time-consuming for your beneficiaries.

Planning for Yourself in Case of Serious Injury or Incapacitation
Death is often the focus of estate planning. But it is just as important to put a plan in place to protect your assets and yourself if you become mentally or physically incapacitated during your lifetime.

Naming a Power of Attorney
Naming your spouse, adult child or other trusted individual as your agent under a durable power of attorney (“durable” means it is still effective even if you lose capacity) allows that person to take care of business for you in a variety of situations. For example, this person might be authorized to pay your medical bills, sign legal documents or apply for Medicare or Social Security on your behalf. If you are detained in a foreign country for some reason, your agent can obtain information about your situation from the US embassy in that country and handle business back at home until you return.

Appointing a power of attorney is crucial for those facing illness or old age. It can also be important for newly-minted adults whose parents can no longer readily or make decisions for them now that they have turned 18 and become legal adults.

Giving a Health Care Proxy Access and Guidance
Your health care proxy (another name for your agent under a durable power of attorney for health care) is more than the person who talks to your doctors while you are sedated after surgery or being held in the emergency room. Your health care proxy may also be the only one who can obtain information about your medical condition—information that privacy laws might otherwise prevent a doctor from sharing with your family members.

Having an agent appointed to make health care decisions for you is critical in making sure those decisions are made in a proper manner when you are not able to make them for yourself.

Planning for Your Family: Successfully Transferring Wealth
Effectively transferring your assets to your beneficiaries involves the interplay of several documents. Understanding how they work together is key to knowing what you need to do to put these plans in place, and having peace of mind that your property will be handled the way you want.

The Work Horse of Modern Estate Planning 
In most US states, a revocable or “living” trust is the central document of an estate plan. A revocable trust can avoid the need for a probate court proceeding after your death. It can also facilitate the handling of your property during your lifetime in the event of incapacity.

With a revocable trust, you transfer title to your assets into your name as trustee. During your lifetime, you are the beneficiary of the trust and can deal with the trust property in the same manner as if the trust did not exist. You can revoke or amend the terms of the trust at any time.

If you lose capacity, the successor trustee you name in the trust instrument can take control of the trust property immediately to ensure it remains available for you. Upon your death, the trust property is distributed to the people and organizations you name in the trust instrument. And this is all accomplished without the cost, delay and publicity of a court proceeding.

A revocable trust may not be appropriate in all circumstances, but you should consider one if you:

  • Are concerned about paying expenses or distributing assets to your heirs shortly after your death.
  • Have assets that would be more difficult to manage if subject to court process or supervision over needed decisions.
  • Want to maintain the privacy of information about your property interests and their disposition.
  • Have a simple estate that you’d like to be handled most efficiently.
Still Necessary, But May Not Be As Important As It Once Was
When you think of estate planning, the first, and maybe only document, most people think about is a will. A will remains a central and necessary document in all estate plans. But due to the advent of revocable trusts, the purpose of a will is not as broad as it once was.

Your will remains the legal document in which you typically name guardians for your minor children, making it an especially important document for young families. It is also typically the place to exercise any powers you may have to appoint (that is, direct the distribution of) property held in an irrevocable trust.

If you have a revocable trust, your will is usually a “pour-over” will, directing that any assets you may not have transferred into your name as trustee during your lifetime should be added to the trust following your death. If you do not have a revocable trust and you are comfortable requiring your heirs to go through a court proceeding at your death, your will can provide for a general distribution of your assets.

An Essential Step 
For a revocable trust to function effectively, the title to your assets must be held in your name as trustee (e.g., Jane Smith as trustee of the Smith Family Trust). If title to an asset is in your individual name (e.g., Jane Smith), a court proceeding may be necessary and the terms of your will control who receives the property, even if it is in your revocable trust. Even with a will or revocable trust, ultimately, the titling of your assets determines what happens to them when you die.

There are also other special forms of title that can control the disposition of an asset. For example, if the deed to your home indicates that you and your spouse own the property as “joint tenants with right of survivorship,” your home will pass directly to your spouse upon your death without either going through a court proceeding or being subject to the terms of your revocable trust.

In the process of estate planning, it is critical to review the deeds, account statements and other documents of title for your property interests to ensure formal ownership of your property is accurate and aligned with your current intentions—especially if the property was purchased a long time ago or your family situation has changed.

Don’t Overlook Life Insurance and Retirement Accounts
Like the title to your assets, beneficiary designations can take precedence over the terms of a will or trust. Usually, retirement accounts and insurance policies require you to name beneficiaries as part of the initial account paperwork. But you can change those beneficiary designations at any time and should always make sure your designations are aligned with the other terms of your estate plan.

Your insurance company or retirement account administrator should be able to provide you with a copy of your current beneficiary designations as well as the forms necessary to make any changes.

Being Sensitive to Tax-Sensitive Retirement Accounts
Retirement accounts are often tax-deferred or have other special tax characteristics. As you update your retirement account beneficiaries, you always want to be aware of the tax consequences of your beneficiaries receiving the accounts. In general, other than your spouse, your beneficiaries will need to withdraw all the assets of your retirement account (and pay the resulting income taxes) within 10 years of your death.

We always strongly recommend consulting with an estate planning or tax professional when reviewing or updating your beneficiary designations. The rules are complex, and mistakes can be costly.

Selecting Your Trustee: Who Is Best Suited to Carry Out Your Plans?
Second only to deciding who receives your property, the most important decision in your estate plan is who will make sure your plans are carried out. The answer to this question can mean the difference between a peaceful, efficient handling of your estate, and one wrought  with challenges.

People often choose a family member or a close friend to be their executor or trustee. But if the situation is more complex or assets will be distributed over a longer period, a professional fiduciary, like Fiduciary Trust, can be a good choice.

The Difference Between an Executor and a Trustee
The roles of executor and trustee can be filled by separate people, but in most cases the same individual or professional is appointed as both executor and trustee.

A Family Member or a Professional Trustee? Weighing the Pros and Cons
Your executor and trustee will be responsible for valuing your estate, gathering your assets and distributing your assets according to the terms of your will and trust documents. Duties also include assessing and paying debts and liabilities, filing and paying taxes, arranging for funeral expenses and ensuring remaining assets are distributed correctly.

This job can last for many years, even decades, if assets are to remain in trust over time. The trustee will continue to be responsible for managing the assets and distributing them to your beneficiaries according to the parameters you have set.

You will need to weigh these duties against the abilities and skills of the individual or professional you are considering.

Qualities to Look for in an Executor or Trustee
The individual or professional you appoint for these important roles should:

1. Have a strong skillset in handling financial affairs
To do the job well, executors and trustees should be prepared for a large amount of time-consuming work. They must be extremely organized record-keepers and have significant knowledge about financial matters. Surrounding themselves with specialized experts is critical, so they will need to be able to work with and manage various professionals including attorneys, accountants and investment managers.

At Fiduciary Trust, we offer many of these essential services ourselves as part of global investment management company with in-house trusts and estates attorneys and tax specialists.

2. Be objective, yet personal, in decision making
If your trust document includes discretionary provisions—such as funds earmarked for educational expenses or to buy a first home—the trustee will need to decide if the requests made by your beneficiaries meet the trust’s requirements for distributing the assets. For example, does a new car for transportation to school fall under educational expenses, or does it qualify as support? If the new home is extravagant, should funds be distributed for a down payment?

These kinds of situations require personal attention, both to the beneficiary’s situation and to your intentions, as the decision must be made impartially and true to your wishes for your family.

3. Be willing to be personally liable
The risk of personal legal liability—even if the trustee is not paid for their work—goes along with being a fiduciary. Under the law, a trustee has the fiduciary duty to be loyal, prudent and always act in the best interests of the beneficiaries. A trustee can be held personally liable if they breach these duties, even unintentionally. Improper accounting, mishandling of assets, conflicts of interest, poor investment decisions and failing to achieve the most advantageous tax savings are all reasons an unhappy beneficiary may seek legal action against the trustee.

Achieving Peace of Mind
At the end of the day, your decision should provide you with peace of mind knowing your affairs will be handled in the way you planned. If you are having doubts, that often means it’s time to consult a professional fiduciary rather than risk strife in the family or mismanagement of the trust assets.

This communication is intended solely to provide general information. The information and opinions stated may change without notice. The information and opinions do not represent a complete analysis of every material fact. Statements of fact have been obtained from sources deemed reliable, but no representation is made as to their completeness or accuracy. The opinions expressed are not intended as individual investment, tax or estate planning advice or as a recommendation of any particular security, strategy or investment product. Please consult your personal advisor to determine whether this information may be appropriate for you. This information is provided solely for insight into our general management philosophy and process. Historical performance does not guarantee future results and results may differ over future time periods.

IRS Circular 230 Notice: Pursuant to relevant U.S. Treasury regulations, we inform you that any tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. You should seek advice based on your particular circumstances from your tax advisor.


How Much Can I Afford to Give Away During My Lifetime?

10.07.2021 Jennifer McCarthy, Trust Counsel

How Much Can I Afford to Give Away During My Lifetime?NEXT POST


A Framework for Estate Planning: Start by Focusing on Yourself

10.02.2021 Leslie Bohner, Chief Fiduciary Officer and General Counsel, Pennsylvania Region

A Framework for Estate Planning: Start by Focusing on YourselfPREVIOUS POST