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A tale of 2 brothers’ estates

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Junior and Jack were brothers and grew up together. Both were Eagle Scouts, college graduates and had exceptional professional careers. They both got married and both had three children.

Junior got divorced after 15 years and remarried just prior to his death. Junior died without a will or any semblance of an estate plan.

Jack stayed married until his wife’s death. He and his wife had simple wills, leaving their assets to each other. After her death, Jack put in place an effective estate plan, which included a revocable living trust.

After his death, Junior’s second wife assumed all of his assets and his three children did not receive any of his assets. Since he lived out of state, there was very little information about his estate and how the proceeds were handled.

After Jack’s death, his assets were distributed according to the instructions in his will and trust. His durable power of attorney and health care power had designated his oldest daughter to make medical and financial decisions on his behalf during his two-year illness. She also was designated as the executor of his estate after his death. His assets passed in an orderly fashion to his three children and his family has subsequently benefited from the fruits of his life’s labor.

I can tell this tale of two estates because Junior and Jack were my older brothers. The financial impact of their life work and what was passed on to the heirs is as dramatic as night and day. One family was left with only memories, while the other family was left with a financial legacy to build upon in the future. The difference is that one brother planned, while the other one “just let life (or death) take its course.”

The basic estate plan

In the U.S., it is estimated that 75 percent of adults will die without a will or any type of plan for passing their assets on to their heirs. This is an incredible statistic, because developing a basic estate plan is relatively simple and inexpensive.

It begins with a will, durable power of attorney and a health care directive. These documents will help minimize confusion and conflicts during a time of family stress. Individuals should also make sure that the named beneficiaries on pension plans, insurance policies, IRAs and similar contracts are current. You should work with a legal professional that has expertise in estate planning to develop your estate plan.

A will directs what will happen to an individual’s assets when he dies. An executor is appointed to make sure that the terms of the will are processed correctly and the assets are distributed properly. In addition, if there are minor children, a guardian is named for their care until they become adults. If a person dies without a will, her death will be considered “intestate.” State laws of descent and distribution will determine how estates will be distributed to the surviving relatives. If there are no living relatives, the property will go to the state. Also, if there are minor children, the state will appoint a guardian.

A durable power of attorney allows an individual to appoint someone to handle his financial affairs, should he become incapacitated or unable to manage his finances. Having a valid durable power of attorney can help the family avoid having a guardian or conservator appointed by the court during an individual’s illness or incapacity.

A durable health care power of attorney will specify who an individual has chosen to make medical decisions on her behalf in the event she is incapacitated or unable to make her own medical decisions.

The best time to begin your estate plan is now. Arrange a meeting with your attorney to get the process started. You will be glad to have the security and serenity of knowing that your estate will be managed according to your wishes.

Michael G. Shinn, Certified Financial Planner, registered representative of securities and investment advisory services offered through Financial Network Investment Corp., and a member SIPC. Visit www.shinnfinancial.com for more information or to send your comments or questions to shinnm@financialnetwork.com.

Neither Michael Shinn nor Financial Network provides legal advice. Consult a legal professional before implementing any strategy.

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