Sunday, March 31, 2013

59) The Third Estate

The Third Estate

assover, (with two Seders in the Diaspora), Holy Thursday, Good Friday and Easter, all arrived this week.  Students, teachers & parents took vacations, family members prepared gatherings & feasts, the S&P 500 hit a high, and tax preparers kept crunching numbers except for family functions and religious holidays.

            I remember a Sunday television show from my childhood that methinks was called 'The Third Estate'.  I believe it  was about religion; I believe it had relatively broad appeal.

            But I couldn't understand the title!

            I concluded that the Third Estate was humankind, and the First Estate was G-d's (or Heaven, if it’s real estate?).  However, I could never figure out who might be the Second Estate.

            As it turns out, in the Middle Ages, 'estates of the realm' were the ‘broad social orders of the hierarchically conceived societies as ordained by G-d’.  It was big in France.

            The Clergy occupied the First Estate in order to ordain Royalty and Nobility (the second estate), who, in turn, ‘settled privileges on the more prestigious commoners, or burghers (bourgeoisie)’ - the Third Estate.  Peasants made up the Fourth Estate.

            Although I believe that humankind has not evolved as much as we might have thought as children growing up in America, I believe that, to some degree, that society shows evidence of evolution.  I think most (although I fear maybe not an overwhelming majority) of the world’s people, now, supposedly, have rights: Human Rights, Civil Rights, and other legal rights; rights, such as to property - an estate.

            Everyone has an estate.

Basically, it’s everything you own, and to which you have rights.

            You would be wise to learn about, and plan your estate.  Everything from additional estate creation and protection (e.g. life insurance, investing, a business), to maximization (tax minimization, investing, protection from lawsuits, creditors, divorce), and settlement (legal devices & distributions, accounting & administration, and taxation).

Estate planning has two parts: the part while you're alive, and the part after you're dead.

Each part requires planning, usually documents, and is coordinated (it’ usually a basic estate plan from an attorney that may save cost.  And even if you pay aalot, how much more are you protecting?  100 times?  More?.

            While you're alive, it's prudent to have at least two documents:

1.    a Living Will/Health Care Proxy
2.    a Durable Power of Attorney

            Your Living Will (your will/wishes while you’re alive but can’t speak for yourself) states your wishes such as whether or not to be kept alive by artificial means.

            Your Proxy (i.e. agent, representative nominee) for your healthcare, names someone to make medical decisions for you, such as whether or not to have an operation, or pull a plug.

            You need to choose someone who understands your wishes and can make tough decisions.  In addition, you may need a substitute person in case the primary person can't/won't serve.

            A Durable Power-of-Attorney names someone as your Attorney-in-Fact to act on their behalf after the point of incapacitation; it’s durable.

            This can power can go into effect at its signing, or it can ‘spring’ into power by some event such as a doctor certifying incompetence.  Such are known as ‘Springing Powers-of-Attorney’.

Different powers can be granted to different people.

            Depending on what powers are appointed to whom, your Attorney-in-Fact can pay bills, collect income, file taxes, buy/sell property, and, maybe make gifts - a special power.

            These documents vary from state-to-state and probably should be coordinated with certain other documents such as Driver's Licenses, where you can donate body organs.

After you've departed, this world, your Will comes into play.  A Will is a final clean-up (vehicle) document for everything left over from, what are considered, ‘Will Substitutes’.

A Will Substitute is anything that takes precedence over & above (& prior to) your will.  Examples include certain joint ownership assets where the deceased's share automatically transfers to the other owner(s)(e.g. Joint Tenants with Rights of Survivorship vs. Tenants in Common), or naming beneficiaries on insurance, retirement accounts, and trust assets.

Your Will states who gets your stuff (e.g. home, money, art, intellectual property, royalties), and who takes care of the children, dependents, and pets.

Your Will may also, need to be specific to the state in which you are domiciled.

Divorce can void a will, and federal law (e.g. pension, bankruptcy), and state statutes usually trump a Will (e.g. a surviving spouse may be entitled to a third of their deceased spouse's estate - unless there's something like a pre/post-nuptial agreement).

Before death, a Will can be rewritten or modified with Codicils.

Estate plans need to be reviewed when tax laws change and personal circumstances change (e.g. marriage/divorce, death/births, disability/windfalls, change of state residence or states in which you own property.

            After death, a Will may allow you to 'speak from the grave' by doing things such as creating and/or having established trusts with personal guidelines for family members.

Wills can be challenged, and if not absolutely clear, can cause confusion.

            An estate goes through an administrative settlement process with each state in which property is located.  This makes sure that everything is accounted for, all monies are collected, all claims are paid, any taxes (e.g. income, gift & estate, etc.) are filed and paid, all beneficiaries are identified, and finally, all assets are distributed.  The Will states how and who does these things.  Things can go wrong.

            The person in charge of executing your last will, is named in your Will as your Executor/Executrix.  In New York the administrative process, called Probate (probating a will), is done by the Surrogates Court, usually with a Clerk.  Both, the Executor and Court are allowed to collect small fees for service, according to a state schedule.  (These fees should be tax-deductible to the Estate - and income to the recipient.)  Family members often waive their fee.  A Successor Executor/Executrix should be considered and listed.

            Should someone die without a Will (i.e. Intestate), then there's a state schedule of who is entitled to the property (e.g. spouse, children, parents, etc., ultimately, the State) that didn’t pass by Will Substitute.

            None of these documents should be kept in safe deposit box (you can leave photocopies, there for back-up).  They should be handy so that if the safe deposit box gets ‘sealed’, when the bank learns of the death of one of the key holders, you have access to them.  They’re important.

            More sophisticated planning, for privacy (court records are public, trusts and beneficiaries are not), tax issues, family issues (like divorce, providing for a minor or children of a prior marriage, or caring for a handicapped person), liability, business continuation, investing, or charitable donations can also be accomplished.  Some of it is not as difficult as it seems if you have a good financial planner, insurance agent,  and ultimately, estate attorney for the document preparation.

            in addition, prudent estate planning should coordinate with all kinds of insurances, elder law, and, possibly Planned Giving, whether it's for gifting (to a charity, and/or in order to qualify for Medicaid) or, possibly Long-term Care Insurance.

            Ideally, estate plans could be discussed with and explained to family members or loved ones.  This way, they know what you want.  And those who will be asked to serve understand what’s expected of them.

            Proper estate planning is a must.  Too many family, business, financial, and tax issues can arise causing immense strife, conflict, time, and cost.  All of this on top of the hurt and healing.

            You can save money, protect loved ones, assets and businesses, remove insult from injury, feel organized and confident, and instead of being a Bull, a Bear - or a Hog, be a SWAN (sleep well at night).

            Live for the good times, plan for the bad.

Is your estate plan up to date?

            Who's your Trusted Family Advisor©?



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