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Are You Doing Enough — Or Any — Succession Planning?

12 April 2021

For most people, succession planning can represent a significant obstacle. You might be organized in your professional life, but when it comes to financial and succession planning, you may find yourself wondering, “Am I doing enough?” 

According to our CEO, Eric Rigby, the most challenging part of succession planning is getting started, and as Benjamin Franklin expertly said, “If you fail to plan, you are planning to fail.” 

It is never too late to get started on your succession planning, and Rigby Financial Group is here to help. 

Succession Planning For Individuals

The truth is there is no perfect time to begin the journey of succession planning. Many people find it easy to delay answering the uncomfortable question of, “What happens to my assets and my loved ones when I die?” Individual succession planning is so highly avoided that roughly half of Americans don’t have a will or an estate plan. It is never too late to evaluate your assets and begin this process. Ultimately, everyone’s succession plan will be different depending on your unique circumstances and how you want what you leave behind to be distributed. 

For those individuals who may feel stressed by the idea of preparing for their death, the best tactic is to break down the task into smaller and more manageable pieces while considering your marital status, the estate size, privacy concerns, and philanthropic goals. 

Marital Status in Succession Planning

An important aspect to review when building a succession plan is your marital status and what your death means for your partner. Every state has different provisions regarding what your spouse is entitled to, so it is imperative to understand the specific laws and provisions of the law that applies to your state of residence. For example, Louisiana is one of 7 states with community properties, meaning that the state, along with Arizona, California, Texas, Washington, Idaho, Nevada, New Mexico, and Wisconsin rules that all assets acquired during a marriage are “community property.” The remaining 43 states are common law property states, which provides that property acquired by one member of a married couple is owned entirely and solely by that person. 

Common Law Property States

In a common law property state, when one spouse passes away, their separate property is distributed according to the will or according to probate in the absence of a will. If they own property in “joint tenancy with the right of survivorship” or “tenancy by the entirety,” the property goes to the surviving spouse. If the property was owned as “tenancy in common,” then the property can go to someone other than the surviving spouse. 

Community Property States

The community property states, also known as marital property, rule that all earnings, property bought with those earnings, and debts accrued during the marriage are shared equally by both spouses absent a separate property regime. Any assets acquired before the marriage are considered separate property and are owned only by that original owner. However, a spouse can transfer the title of any of their separate property to their spouse or the community. When it comes to community property, a spouse may not transfer, alter or eliminate any whole piece of community property without the other spouse’s permission, but they can manage their half. Upon death in a community property state, 50% of your assets will go to your surviving spouse, and the remaining 50% will go to your children under the age of 23. If you do not have children under that age, you are entitled to leave your half of the community property to whomever you wish. If you choose to leave your assets to someone other than your spouse, you will need them to sign off on this request. 

In community states Arizona, Nevada, Texas, and Wisconsin, you can add the “right of survivorship” to your community property so that when one spouse dies, the other automatically owns 100%, which avoids probate. While in California and New Mexico, couples can qualify for simplified procedures for transferring property to avoid probate. In Louisiana, however, the community property must go through probate. 

If you die without having an executed will in force, your assets will be subject to intestate succession. If you die intestate while single, the court will identify your closest legal relative(s), who will then inherit your assets—minus the court and executor expenses associated with administering an unbequeathed estate. Most likely, if you are unmarried, this will be your children, or your parents, or your siblings, respectively.  

Why You Need a Will

Forbes lists a will as the number one document you should have in your estate planning arsenal. Despite the advice that a will is a necessary document, 6 out of 10 people do not have one. Taking the time to create a will gives you and your family a plan when dealing with death and allows you to have control over your belongings and what you want to happen to them when you are gone. The will removes the guesswork of who will inherit what aspects of your estate and allows your family to grieve rather than figure out how to handle what you’ve left behind. Additionally, a will keeps your family out of probate court. If you die without a will, which is referred to as dying intestate, the court will settle your estate for you. Like marital status, each state has its own intestacy laws; most courts will give half your belongings to your spouse and half to your children. But, if you are not married or have children from a previous marriage, things become more complicated. If you are single and childless, the court will divide everything evenly between your parents and siblings. A will also protects your children. If you die intestate and have children under 18, you will have no say as to where the children end up. A will is the only way to leave a plan for the care of your children. 

Legal Aspects of Succession Planning

Succession planning requires a lot of documentation, such as a will, a medical power of attorney, and a financial power of attorney. Getting all of these documents in place is crucial, and we recommend seeking the advice of retaining professionals such as an attorney and a CPA to ensure that you are well-informed and that the process is handled efficiently and correctly. 

Durable Power of Attorney

Regardless of your economic situation, succession should be at the forefront when you plan your future. 

Suppose you cannot make decisions for yourself. In that case, you will need a durable power of attorney (POA), which legally authorizes someone else to handle certain matters, such as finances or healthcare, on your behalf. If the power of attorney is durable, it remains in effect if you become incapacitated due to illness or an accident. Durable powers of attorney also help plan for medical emergencies and declines of mental functions to ensure that your finances are taken care of. Some of the things that the durable power of attorney can do on your behalf are as follows: 

The POA documents, similar to a will, eliminate confusion and uncertainty when family members are faced with difficult decisions. Unlike ordinary powers of attorney, a durable POA will not expire if you are no longer capable of making decisions. You can revoke your power of attorney at any time, as long as you’re mentally competent. 

Medical Power of Attorney

Oftentimes, individuals prefer to have separate powers of attorney for their financial and medical affairs. The person appointed as your medical or health POA will be granted the authority to handle all the medical decisions on your behalf. This individual will operate in accordance with your wishes to execute your care and end-of-life arrangements. This appointment can be used in conjunction with a living will or may contain living will directives. If you are in a vegetative state or unable to communicate your wishes, you will need a medical power of attorney to allow your loved ones to decide on your care. Upon appointing a medical POA, it is advisable to consider nominating an alternate agent in case your first choice is unable or unwilling to make a healthcare decision. 

When appointing a medical POA, you must be a mentally competent adult. If you should ever choose to cancel your designated individual’s status as POA, you must be of sound mind and notify your doctor and the appointed individual. 

Benefits of Bringing in a CPA During Individual Succession Planning

Beyond your marital status, POAs, and your will, there are numerous areas to consider when implementing a succession plan. While most people know they should hire a good attorney to help ensure the legal requirements are met professionally and thoroughly, not many people understand the value of a CPA in the process. When it comes to nuances of succession planning, a CPA is beneficial in the following ways: 

  • Helps reduce taxes: a CPA can advise you on reducing the chances of owing estate taxes, and the impact of what various choices mean for your heirs. 
  • Aids in trust planning: while an attorney can help you set up a trust, a CPA will help ensure you follow tax rules, understand the tax filing forms, and are using the correct type of trust. 
  • Advises early actions: not all estate and succession planning happens in a will or trust, so a CPA can help you make decisions ahead of time, such as using the gift tax exclusion or diversifying ownership in your business. 
  • Helps your executor: a CPA can develop a relationship with the executor of your estate to aid in various aspects, including filing final tax returns, estate Forms 1041, or Schedules K-1. 
  • The Rigby Financial Group can put together a statement of net worth, liabilities, passwords, and other financial information to keep you organized.  

Succession Planning with Rigby Financial Group

When you want to begin the succession planning process, choose Rigby Financial Group. At Rigby Financial Group, we ensure that you have a plan that best fits your individual needs and the long-term goals you have for your family. Although succession planning is often an uncomfortable subject, leaving your loved ones without a plan in place will place an unyielding burden on them that is dealt with while they process their grief. 

Rigby Financial Group welcomes the opportunity to take that first step with you to get your succession planning process rolling. Our knowledgeable CPAs and financial advisors are ready to offer the support you need regarding succession planning and establishing financial security and growth. 

Contact us today to find out how the Rigby Financial Group team can help you!

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