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The Importance of Planning

Over half (55 percent) of all adult Americans do not have a will, according to a recent survey conducted by Harris Interactive for Martindale-Hubbell. Reasons given ranged from not wanting to think about dying to the lack of sufficient assets to warrant a plan. The fact is, though, that most adults own property when they die that has to be divided in accordance with state statute in the absence of a will. However, by planning ahead, you can better provide for those you care about. Therefore, the key components of a comprehensive estate plan are the focus of this newsletter.

The State of Wyoming Has a Plan for You 

Good news—if you fail to plan, the State of Wyoming has a plan for you. Under Wyoming intestacy law (the default plan), your assets will pass according to state statute in the following order of preference: (1) if you are married with surviving children, your spouse will receive one-half the property and your children will receive the other half; (2) if you are married with no children, your spouse will receive all your property; (3) if you are not married and you have surviving children, your children will share equally in your property; or (4) if you have no spouse or children, your property will pass equally to your mother and father and brothers and sisters. In addition to deciding who will receive your assets, the state will appoint someone to administer your property for you. Your surviving spouse has preference on this appointment, followed by your children and other more-distant relatives. By the way, your default personal representative and the attorney for your estate will also collect a handsome fee from your estate. So, if you are happy with the state’s plan, with the lack of choice as to who will handle your financial and estate matters, and with paying a statutorily authorized fee (approximately 2 percent of your estate) to the personal representative and the probate attorney, then you do not need to read any further.

The Key Documents 

For the most part, a good plan should be comprised of the key documents described in greater detail below. (In certain instances, a trust will not be used, depending on the specific circumstances and the nature of the assets involved.) 

1.    Will

A will is a legal document that sets forth your intentions with respect to the distribution of your property upon death. Most states require formal procedures for the will to be self-proving, which usually requires at least two witnesses and a notary to witness and sign the document in the presence of the testator. However, there are several things to think about. First, a will only effects probate property, which is property held in your individual name that does not pass to someone else as a beneficiary. For example, a will does not typically affect life insurance proceeds, retirement plan proceeds, or property titled as joint tenants with rights of survivorship. Second, property that passes under the terms of a will is subject to probate, which is the process by which someone’s assets are gathered, accounted for, and distributed to heirs and beneficiaries. Also, that person’s creditors are identified, and debts are satisfied from the assets of the estate.

2.   Revocable Living Trust

A revocable living trust can be thought of as a substitute for a will and avoids the delays and expenses of probate. A trust is also a great way to plan for declining health and incapacity. As the name indicates, a revocable living trust is revocable and amendable. As you move through life, your needs and goals change, and your trust should also change to account for these factors. Initially, a trust document sets out the terms of distribution during life, upon incapacity, and in the event of death. The trust also names who you wish to serve as trustee, initially and in the event of incapacity or death. The key to an effective trust is that it is funded. In other words, you have to transfer your property to the trust, or title it in the name of the trust. Keep in mind that titling the assets in the name of your trust does not effect your lifetime enjoyment of the assets, your tax reporting, or your ability to pledge, encumber, sell, or exchange the assets. In fact, you will continue to have the same unfettered use and access to your assets as the trustee of your trust that you had prior to transferring those assets to the trust. Once in the trust, the assets pass according to the terms of the trust document and will not be subject to probate. Avoiding the expense and delay of probate and providing your family with a relatively seamless transition are the main reasons for using a trust-based estate plan.

3.   Durable Power of Attorney

The durable power of attorney (DPOA) is the legal document that allows others to manage financial matters on your behalf in the event of incapacity. In general, the DPOA permits the person you designate to do just about anything you would be able to do if you were cognizant and capable of doing things on your own. There are two main types of DPOAs—immediate and springing. The immediate DPOA is effective upon signing, while the springing DPOA does not “spring” into effect until a physician determines that you are incapacitated. When you create the DPOA, you must make sure that your power of attorney is durable, which means that it survives incapacity. In Wyoming, as in most states, this requires that the document state that it is durable.

4.   Durable Power of Attorney for Health Care

The DPOA for health care is analogous to the DPOA described above except that it deals specifically with health care decisions. One important thing to remember is the HIPAA waiver. Under HIPAA privacy rules, you must grant your health care agent the right to receive and review your health care records so that he or she can use those records to make the proper treatment decisions on your behalf. You should provide a copy of your DPOA for health care not only to the person designated as your overall DPOA but also to your primary care physician. Finally, make sure that you name a back-up representative and provide him or her with a copy of the document in case your primary representative is unable or unwilling to serve.

5.   Living Will

The living will is the legal document that states your intentions in the event that a physician or physicians determine that you are in a terminal vegetative state, that your life can only be sustained by artificial means, and that there is no possibility for your recovery with existing medical technology. The living will should state whether the DPOA for health care or your living will prevails if there is a conflict. In addition, your living will should address organ donation and whether food and hydration are supplied or withdrawn.

6.   Personal Property Memorandum

Wyoming law allows personal property to be dispersed by memorandum. It is best to refer to that list or memorandum in your will or revocable living trust so that others are aware of it. The list can be changed and updated as you designate specific items of personal property for specific individuals. Maintaining the list eliminates the need to update your documents through an attorney each time you want to make a change. Simply sign and date the memorandum and keep it in a safe place, preferably with your other estate planning documents.

Above are six key components—and a good foundation—for a comprehensive estate plan. Once they are in place, you can start looking at additional vehicles that complement and enhance your plan, such as life insurance trusts, charitable trusts, and other more sophisticated arrangements that can minimize or eliminate estate taxes.

I hope you found this brief estate planning overview helpful and informative. Please do not hesitate to contact me if I can answer any questions or provide you any additional information concerning this or any other estate or charitable planning tool.

Tracy R. Richardson, Director of Planned Giving, 307-766-3934 or e-mail trichar6@uwyo.edu

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