Sheehan Phinney

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Q: What are the most common mistakes people make when creating, or avoiding, an estate plan, and how can they be prevented?

A: One common mistake is assuming estate planning is only necessary for people with substantial wealth or complex family issues. Another is assuming your situation is “simple.” Sometimes it is, but often a conversation reveals issues that deserve planning.

You may have children from a prior marriage, a beneficiary who should not receive assets outright, a closely held business, charitable intentions, incapacity concerns, or assets titled in ways that affect how your plan will work. That does not mean your plan needs to be complicated. It means it should fit your circumstances.

The best way to prevent mistakes is to treat estate planning as a conversation, not a transaction. Before focusing on documents, we should talk about your goals, family, concerns, and what you would want if you could no longer speak for yourself.

Q: How do powers of attorney work, and why are they essential in cases of incapacity or medical emergencies?

A: A power of attorney gives another person legal authority to act on your behalf. A financial power of attorney may allow your agent to pay bills, manage accounts, work with financial institutions, and sign documents. A health care power of attorney allows someone to make medical decisions if you cannot communicate your wishes.

These documents are important and powerful. A financial power of attorney is sometimes described as a “license to steal” because, in the wrong hands, it can give someone access to your finances. That is why the choice of agent matters. Name someone you would trust to act for you today, not only if you become incapacitated later.

A power of attorney gives someone else authority to act for you, but it does not take away your right to make decisions. If someone must be legally prevented from making decisions because of incapacity, that generally requires court-supervised guardianship or conservatorship.

For health care decisions, naming multiple agents to serve together can create problems if they disagree. The best choice is the person who understands your values and wishes.

Q: What are some effective ways to integrate charitable giving into your estate plan?

A: Charitable giving can be simple or sophisticated. You might leave a gift in your will or trust, name a charity as an account beneficiary, use a donor-advised fund, or create a charitable trust.

Even if charitable giving is not a primary goal, consider naming a charity as a “taker of last resort.” If none of the people you name are living, you can direct where the property should go rather than leaving that result to default rules.

Q: How can blended families, second marriages, or complex family dynamics benefit from a more customized estate plan?

A: This is where planning becomes important. In a second marriage, you may want to care for your surviving spouse while ensuring that children from a prior marriage receive an inheritance. Those goals can coexist, but they need planning.

If everything is left outright to the surviving spouse, that spouse can usually decide where the assets go at death. That may be fine in some families. In others, it can unintentionally disinherit the first spouse’s children.

A trust can help balance these concerns. It might support the surviving spouse during life, while directing the remainder to children or other beneficiaries. The plan can also address who serves as trustee and when distributions should be made.

Q: What steps should business owners take to ensure a smooth transition or succession plan?

A: If you own a business, your estate plan should work with the company’s governing documents, buy-sell agreement, ownership structure, and succession goals. Key questions include who can manage the business if you become incapacitated, who should own it after death, whether it should be sold, and how it will be valued.

A good succession plan protects the business, family, employees, co-owners, and customers.

— Mark B. Bartram, attorney and co-chair of the Estate Planning Group, Sheehan Phinney Bass & Green PA