Setting out your end-of-life instructions, including provisions for medical care and the distribution of assets to the next generation, is an essential task. This will help you get started.
BY SAM SCHMITT
Estate planning isn’t an easy subject to talk about, but it is nonetheless essential. In a May 13 “Fresh Air” interview with Terry Gross, here is how journalist and author Tom Brokaw frames the benefits of addressing these thorny issues: “All families need to sit down and have a tough conversation. Who’s going to be the caregiver? What are the circumstances about DNR—do not resuscitate? What do you say to the medical team if a member of a family goes in and seems not able to recover easily? … This will reduce the emotional turmoil a great deal if you talk about that in advance.”
This is especially true of Foreign Service families, given the vicissitudes and risks of overseas life.
An advance health care directive (also called a health care proxy or power of attorney for health care) is one of several documents that make up an estate plan—the collection of legal paperwork that sets out your end-of-life instructions, including the way your assets will pass to the next generation. The person doing this planning can either hire an attorney or do the work themselves, following templates (many of them available online).
Regardless of which method you choose, avoid tying yourself in legal knots by taking time to:
• Determine your goals.
• Assemble existing legal paperwork, including assets and liabilities, and lists of family members and friends.
• Select the proper estate planning documents.
• Draft and revise before executing the final drafts.
• Guard the originals of your documents.
The simplicity of this process belies the seriousness of the decisions that must be made. You will need to balance many competing interests as you decide whether to give property to your beneficiaries in trust or outright, determine the best way to support your surviving children fairly and equally, and select responsible fiduciaries (someone required to act for your benefit with respect to your estate). Hasty action will reduce the quality of your choices.
Members of the Foreign Service community should begin by selecting the state law that will govern their wishes, regardless of the location of death.
Setting Goals. This seems so basic that many people skip the step entirely. But members of the Foreign Service community should begin by selecting the state law that will govern their wishes, regardless of the location of death.
In addition, many parents want to designate emergency guardians for their minor children. Some must plan for litigious family members or ex-spouses. If you are unsure what goals you should have, conduct research online, visit a law library or contact an estate planner.
Taking Inventory. An estate planning inventory is a lengthy questionnaire about your money, family and obligations. You’ll need to gather your land records, deeds, titles, mortgages, loan documents, insurance policies, bank and brokerage account information, judgments, existing beneficiary designations and your existing estate plan.
The very mobile Foreign Service lifestyle makes it difficult to maintain current copies of all these documents. You may also find it difficult to develop enough close relationships to make wise fiduciary designations. Avoid the impulse to rush through the inventory without gathering the appropriate information and designating the same person in too many fiduciary capacities.
Filling Out Your Planning Documents. These come in many varieties, but at a minimum they encompass beneficiary designations, wills, trusts, powers of attorney and advance directives.
Non-Probate Assets. Beneficiary designations frequently control the descent and distribution of more wealth than the individual executing the will (who is known as a testator). These designations control the passage of your non-probate assets: Thrift Savings Plan (TSP-003), Federal Employees Group Life Insurance (SF-2823), independent individual retirement accounts, 401(k)s, brokerage accounts, and your final paychecks if you’ve completed a DS-1152. (See also the DS-5002 Designation for Unpaid Annuity, SF-3102 Other Agency Designation, SF-2808 Civil Service Retirement, and DS-7715 Variable Contribution Plan). Revising these designations is a simple, effective way to make progress on your own.
Probate Property. Everything else you own will probably be probate property. Double-check the small print in your titles, mortgages and other vital paperwork to make sure. Common examples include cash, cars, bank accounts, stock and household property. Real estate is frequently a probate asset, but it can become a non-probate asset if the title contains language indicating you own it as a joint tenant with rights of survivorship. In that case, the terms of the joint tenancy would govern, not your will. But barring such exceptions, your probate assets must be in your will or the court will determine who inherits them.
Wills. A will distributes a testator’s probate property when he or she dies. Most states require these documents to be in writing and to be signed by the testator and two witnesses. They sometimes require the testator to orally declare the document to be his or her will. Meeting these requirements gets the will into a probate court proceeding. However, the true quality of your will, and the likelihood that it will withstand legal challenges, depend on the wisdom with which you have balanced the competing interests affecting your estate. These include checking your will’s compatibility with your beneficiary designations and properly calculating total gifts to each beneficiary. A blunt instrument that does little more than meet the legal threshold probably misses the mark.
The true quality of your will, and the likelihood that it will withstand legal challenges, depend on the wisdom with which you have balanced the competing interests affecting your estate.
Trusts. A trust holds and preserves property. A settlor is someone who creates a trust by transferring property to a trustee, frequently a spouse. The trustee then holds that property for beneficiaries, often children. As with wills, most states require trusts to be in writing; identify the settlor, trustee and beneficiaries; reflect a body of assets; and impose duties on the trustee.
A trust allows you to exercise some control over your property from beyond the grave. However, much like a will that only satisfies legal minimums, a poorly drafted trust can complicate estate administration. For example, it could continue holding your property indefinitely rather than distributing it to your beneficiaries. You must avoid leaving your fiduciaries in the position of having to probate your estate, and dispense with perpetual trusts.
Your Finances and Health. A robust estate plan will include a durable power of attorney, which grants an agent authority to do business for the settlor. The main advantage of this mechanism is that the settlor’s bills will continue to be paid and utilities turned off when he or she can no longer do so. Similarly, an advance health care directive explains a settlor’s wishes about medical treatment in case he or she is incapacitated. This way, a settlor can explain his or her preferences about quality of life, life support and invasive medical procedures before it is too late.
Executing both types of documents before they are needed will reduce angst for you and your loved ones. Most states have statutory short forms you can complete yourself. However, these templates must be adhered to closely because even small deviations can have profound effects on their validity. Don’t use unvetted forms from unknown sources for these purposes.
Finalizing Your Documents. When you are satisfied your documents are flawless, find two witnesses who do not receive anything under your will; gather before a notary (or a consular officer, if you’re overseas); orally name the documents you will be executing; state that you are “over 18, of sound and disposing mind, and free from duress”; and sign at the end. Each state requires different formalities, so failing to perform all your state’s requirements may invalidate part of your estate plan.
Guard the Originals! Like setting your estate planning goals, the first item on my checklist, this may seem too obvious to worry about. But it is easy for Foreign Service families, who spend years at a time overseas, to lose track of their original will. Keep it in a safe deposit box, fire-resistant safe, with a trust company, or at the court where it will be probated. Wherever it is, your executor must know where it is and have access to it.
Make Good Choices. The true value of estate planning lies in making good choices at each step of the process. Take advantage of the opportunity to research best practices, seek second opinions and professional advice (if needed)—and resist the temptation to rush to the signature line.