We Aren’t Rich: Basic Estate Planning for Non-Gazillionaires

We Aren’t Rich: Basic Estate Planning for Non-Gazillionaires

Several times a year when talking to potential clients, I hear the quip “I am not rich. I don’t have an estate to plan.” After the obligatory chuckle and nod, I give the explanation that estate planning is simply the generic legal term used for the process of arranging your personal and financial affairs in a manner that can protect you, your family, and the assets, themselves. The client will typically express relief (especially when they realize that the lawyer isn’t planning a complex, and thus expensive, process) and the process will proceed.

For some reason, many people believe that the process of estate planning only involves wealthy people. In fact, this is not the case. Estate planning can benefit most people (including those with relatively modest estates). In the most basic sense, this is because, no matter your net worth, you have some of the same risk factors that multi-millionaires have (for example, disability and death). In fact, in many instances, the only risk factor that wealth people have that those with more modest assets do not is the risk of adverse tax consequences when they die or give major gifts. If you’re not a “gazillionaire,” we don’t even need to discuss that.

So, if you’re an average Joe, what kind of estate plan would benefit you? Easy. An uncomplicated, straight-forward, attorney-drafted plan that protects you in situations of disability (i.e., times you cannot care for yourself) and that protects your family and provides stability upon your death. In Texas, there are 5 basic estate planning documents used to accomplish these objectives that lawyers provide. They are as follows:

  • Last Will & Testament: The cornerstone of any estate plan is the Last Will. In general terms, this document assigns ownership of your property upon your death and nominates someone else to take charge of your estate (the executor). The benefits to having a will are simple. First, you control the disposition of your property; second, you ensure a trusted person takes charge of the process on your behalf by nominating the executor.
  • General Durable Power of Attorney: In the most basic terms, this type of power of attorney allows you to nominate someone else (an “agent”) to make any necessary financial or property decisions for you if you are unable to do so for yourself. This is the cornerstone of the disability portion of the plan. Let’s say you get bonked on the head and are lying in a hospital unconscious. This allows you to ensure a trusted person can access your finances to pay bills (like bills from a health-care provider or house payment). If you don’t have such a power of attorney in place if you become incapacitated, your loved ones will likely have to result to obtaining a guardianship (an expensive and time-consuming legal process).
  • Medical Power of Attorney: Remember how you need someone to make financial decisions for you if you’re incapacitated, well, what about health-care decisions? If you’re unconscious, it would be difficult for you to consent to medical treatment, right? That’s where a Medical Power of Attorney comes in. Like the financial power of attorney listed above, this allows you to name an agent to make medical decisions for you if you can’t make them for yourself. Fear not, if you don’t have one of these now, State law provides that a hospital or physician will stabilize you if you’re in imminent risk of death but it may be nice to have someone else (like a loved one that knows your preferences) to actually make the decisions and consent to medical treatment for you.
  • HIPAA Release: HIPAA is a Federal health care privacy law that restricts what information health-care providers may release to others. This document simply makes clear that you are ordering your private information released to those individuals you name as agents under your Medical Power of Attorney.
  • Advance Directive (a/k/a Directive to Physicians): Years ago, the case of a Florida woman named Terri Schiavo made the national news very routinely. Ms. Schiavo was in a Persistent Vegetative State (sort of akin to a coma) and was not expected to recover. Her spouse wanted the doctors to discontinue life-sustaining medical treatment while her parents disagreed. The case went to court and quickly became national news (even involving a law made by the U.S. Congress and signed by President George W. Bush). What an incredibly painful and public disagreement for all sides of the family! If only Terri would have had an Advance Directive she could have made known her personal wishes to the doctors (and public), and, likely, the case would have been resolved much faster without all the public fireworks. This directive allows the declarant (you) to provide your wishes to the medical team regarding life-sustaining medical care (e.g., hydration and nutrition).

In addition to those documents drafted by your lawyer, you should also consider the following:

  • First, life insurance planning. While lawyers don’t typically sell life insurance, this can be a critical part of your comprehensive estate plan that you shouldn’t overlook. Life insurance can help alleviate the financial burden caused by an untimely death, burial, lack of income (because of the death of the breadwinner or breadwinner’s spouse), and can stabilize disparities in loss of family income, pay-off mortgages or cars, and provide a source of cash for the family to get by while things are tough.
  • Second, Pay-on-Death Designations on banking accounts (or stock accounts) can ensure that bank accounts owned solely upon by the decedent aren’t frozen by the bank during probate. In other words, an account holder may designate another person to be the beneficiary of a bank account when he or she dies. This is particularly important in situations where the account holder has bank accounts that don’t have a co-owner listed. For example, if an adult child is caring for an aging or sick loved one, having a POD designation may allow the adult child the financial resources to settle debts, provide burial, or even work with an attorney to begin the probate process.

Though most lawyers don’t handle the last two points (the life insurance and POD designations), lawyers who routinely handle estate planning can easily draft the documents listed above (or others, as needed) and do so for a basic price. In our firm, we have an efficient process that allows for clients to provide information regarding their desires via a simple worksheet form. Best of all, we charge a low, flat-fee for such plans so they’re affordable on nearly any budget. Whatever you do, you should have a plan. Call our firm today for a free consultation regarding your estate plan. Even if you’re a non-gazillionaire. Call us today at (469) 607-4500.

 

ATTORNEY CHRIS PARVIN is Board Certified in Estate Planning & Probate Law by the Texas Board of Legal Specialization. Mr. Parvin is the Managing Partner of the Dallas, Texas law firm of Parvin Law Group, P.C. and serves as an Adjunct Professor of Law at Texas A&M University School of Law. Mr. Parvin can be reached by email at chris@parvinlaw.com

Parvin Law Group, P.C. is a Concierge Law Firm in Dallas, Texas with attorneys practicing law in the fields of Estate Planning, Probate, Business Law and Family Law.