In this issue of Sandy Spring Financial News I will expand upon my discussion of the core elements of Transition Planning by taking a further look at the first element - Legal Documents.

Many individuals believe that the primary focus of estate planning is to draw up legal documents.  While I agree that well drawn legal documents are the foundation of a comprehensive estate plan and should not be taken lightly, they only touch the surface of the issues involved.  

There are a number of clients I work with who do not have estate planning documents, yet they have a plan, it just may not be the plan they envisioned.  If an individual were to die without a Will or Revocable Living Trust in place they are deemed to have died intestate.  Under this provision, the state where the individual resided disperses all assets based on existing state law while taking into consideration the individual's family structure (marital status, presence of children, and the age of any children).    

In the unfortunate event an individual were to become incapacitated without the appropriate legal documents-Revocable Living Trust, Durable Financial Powers of Attorney, and Medical Advance Directives-a Court supervised Guardianship process commences.  Through this process an individual is named legal Guardian, who going forward, must file accountings tracking all income and expenses of the estate for the Court to review.  Again this ultimately may not be what the individual had in mind, and often is an unpleasant situation for the family.    

Properly drawn legal documents allow you to clearly designate who you wish to handle your financial and medical affairs during illness and the settlement of your estate when you die.  They also define the dispersion of your assets.  Well drawn documents can create tax plans to help individuals minimize, if not eliminate, potential estate taxes-saving tens, if not hundreds of thousands of dollars.  

Regardless of net worth, marital status, or family structure, anyone over the age of 18 should have an updated Will, Financial Durable Power of Attorney, and Medical Directive.  These documents can help protect an individual during illness and transfer their assets per their desires.  A Revocable Living Trust, based upon an attorney's input, may be a suitable complement. All documents should be tailored to the individual's specific needs and reviewed at least every five years or at any time a change occurs in the tax laws, the client's family structure or location of residence.  This is why I recommend that my clients meet with an estate planning attorney for the creation, review, and revision of all legal documents.  

Having updated legal documents is just the first of the nine core elements of a Transition Plan.  Within these documents, an individual will need to select Fiduciaries-individuals or corporate entities named as decision makers.  In next month's issue we will take a closer look at this core element, Selecting Your Fiduciaries.  As always, please feel free to forward this email to anyone that you feel might benefit from this information, and call me at 301-785-4112 or send an email to pfish@sandyspringinv.com if I can help you in any way.