Estate Planning Tips for Eco-Friendly Homeowners

Mark Hauser, co-managing partner at Hauser Private Equity, discusses the process of real estate planning, and how it can benefit individuals in the long and short term.

More people than ever are investing in eco-friendly properties. An estimated 38.5% of people have purchased eco-friendly properties as of 2019 and this figure is rising each year.

There are many reasons to invest in eco-friendly properties. However, there are also some challenges to take into consideration as well. One of them is dealing with estate planning.

Dealing with Estate Planning for Eco-Friendly Properties

In the financial planning and investment arena, the phrase “estate planning” has a certain cachet. The words often conjure up visions of well-heeled individuals engaged in intricate plans to transfer their wealth upon their death. The disposition of assets could include multiple homes, exotic cars, private jets, and other trappings of a high-income lifestyle. For eco-friendly homeowners, this can involve making sure their property is kept in good condition and given to someone that cares about sustainability.

Although that’s often the case, private equity principal Mark Hauser notes that individuals of varied income levels can benefit from an estate plan. He also addresses another scenario: when the individual becomes incapacitated rather than passing away.  

Snapshot of Estate Planning

“Estate planning” collectively refers to the preparation necessary to oversee someone’s financial affairs if they die or become incapacitated. The estate planning process includes instructions for the bequest of the individual’s assets to the people designated to receive them. Common estate assets include houses, vehicles, and fine artwork. Stocks, pensions, and life insurance may also be included in an individual’s estate.

The estate plan originator may want to keep family wealth intact or financially provide for a surviving spouse. their children, and pets (if applicable). Funding a child’s (or grandchild’s) education, or donating a substantial sum to a charitable cause, are other motivations behind an estate plan. Finally, Mark Hauser states that a well-crafted estate plan will facilitate the settlement of the originator’s debts and estate taxes.

An Estate Plan’s Key Steps

Every estate plan includes several key steps. First, the originator’s funeral arrangements are spelled out. Next, a will designates who will inherit the individual’s assets upon their death. By establishing a trust, and/or making donations to recognized charities, estate taxes may be minimized.

The estate plan names the estate’s executor, or person who will oversee the disposition of the estate. Finally, the estate plan includes financial and healthcare directives should the originator become incapacitated and unable to handle their own affairs.

Putting Estate Plans in Perspective

It’s a misconception that estate plans are just for those in the upper income brackets. In fact, says Mark Hauser, anyone over 18 should seriously consider a professionally developed estate plan. Even if an individual has few assets, the estate plan ensures that other parties will understand the person’s wishes.

Designing an estate plan is a complex undertaking that involves multiple parties and requires careful attention to detail. The process also requires navigation of varied legal and financial issues. Therefore, private equity expert Mark Hauser recommends that estate planning clients enlist the services of an attorney with estate law experience.

Despite widely available resources, people of all income levels often fail to create an estate plan. If an individual dies without an estate plan, a probate court will handle the person’s asset distribution (and perhaps not as they intended). The probate court judge will adhere to local laws when deciding what to do with treasured heirlooms, the family home, prized collector cars, and other assets.

8 Key Components of an Estate Plan

A professionally crafted estate plan addresses the originator’s death plus issues that could arise from their incapacitation. The plan should contain eight important documents, including those that address legal, financial, and medical considerations.

A Will

A clearly written will is a legal document providing directions on the disposition of the originator’s property after their death. The will also sets forth instructions on how custody of the person’s minor children (if applicable) will be handled during this period.

The will also spells out whether the originator wishes to have a Trust created after they die. If they approve creation of the Trust, they will designate a Trustee who will be responsible for fulfilling the will’s intentions. The Trustee manages the property and other assets contained in the Trust.

How a Will Relates to the Probate Process

Probate is the court-supervised legal process that determines a will’s authenticity. Mark Hauser notes that probate typically precedes distribution of the will’s named assets.

Within 30 days of the originator’s death, the will’s custodian must take the document to the will’s named executor or the probate court. Once the court designates the executor, they can legally act on behalf of the deceased originator.  

In certain cases, the probate process could be concluded relatively quickly. With more complex estates, probate could drag on for months, a year, or longer.

A Trust

A Trust is a legal entity that permits a third party (the Trustee) to hold assets for a beneficiary. The Trustee manages the assets’ direction after the originator’s death. This can be important when assets are directed to a beneficiary with questionable ability or ethics in handling money.

When correctly administered, a Trust can play a role in minimizing estate taxes. Mark Hauser emphasizes that the Trust can also help to facilitate a smoother execution of the probate process.

Financial Power of Attorney

A Financial Power of Attorney is a legal document designating someone to handle an individual’s financial matters. These tasks can include opening and/or closing bank accounts, executing stock trades, and other financial functions.

Durable Power of Attorney

A Durable Power of Attorney legally enables another person to handle the originator’s non-medical or non-health affairs. The word “Durable” means that even if the individual becomes incapacitated, the Durable Power of Attorney stays in effect.

Medical Power of Attorney

A Medical Power of Attorney designates another person to execute healthcare decisions for an originator who is unable to make their own choices. The person assuming this responsibility should have the rational thinking skills and maturity to make the most appropriate decisions.

Living Will

A Living Will enables an originator to detail their medical preferences, most often for end-of-life measures such as life support.

Advanced Healthcare Directive

An Advanced Healthcare Directive combines a Medical Power of Attorney and a Living Will. The originator can issue their own healthcare instructions but designates another person to make decisions if the originator cannot make their own healthcare choices.

HIPAA Authorization

A HIPAA Authorization permits the sharing of medical records and relevant information with a third party.

An Estate Plan Offers 3 Important Benefits

A well-designed estate plan offers three key advantages. First, says Mark Hauser, the will spells out the disposition of assets. The estate plan also offers protection for legitimate heirs and can help to streamline the probate process.

Spells Out Inheritance Directives

An estate plan includes a will that clearly details each recipient of one or more assets. Certain family members may be miffed at the asset(s) they inherit (or don’t inherit). However, this scenario is preferable to the chaotic squabble (and possible lawsuits) that could ensue without the will’s existence.

Protects Legitimate Estate Heirs

A well-written estate plan protects legal heirs in two ways. First, the originator may want their minor children cared for until they reach adulthood. The estate plan will detail these arrangements and explain when (and how) children will obtain proceeds from the estate. In addition, heirs will be protected if a relative could potentially accuse them of stealing items of value.

Minimizes Probate Court Obstacles

Most estates must go through probate court, the judicial system sector that oversees wills and estates. With that said, there are certain exceptions to probate court.

A well-crafted estate plan is more likely to pass through probate court with relatively few delays. Conversely, says Mark Hauser, an unclear estate plan will lead the state to decide how the estate should be resolved. This resolution may not be what the originator would choose.

How Taxes Figure into an Estate Plan

An estate planning attorney can design an estate plan that minimizes taxes. In turn, this maximizes the amount left to the originator’s heirs. A basic understanding of three types of relevant taxes is useful.

• Estate Tax: An estate tax is levied on estates over a certain value. The tax is assessed on the dollar amount exceeding the maximum, not the entire estate value.
• Gift Tax: A gift tax is levied on gifts over a specific dollar amount. The giver pays this tax, not the recipient.
• Inheritance Tax: An inheritance tax is levied on a person who inherits money or property from the deceased individual.

Avoid These 7 Estate Planning Errors

An incorrectly formulated estate plan can cause inaccuracies, procedural delays, and even potential failure to realize intended benefits. Private equity executive Mark Hauser lists seven estate planning mistakes to avoid. By working with an experienced estate planning attorney, these errors can likely be prevented.

• Failure to Properly Title Assets for Future Inheritance
• Failure to Include Charitable Gifts in the Plan
• Failure to Make Charitable Gifts During the Originator’s Lifetime
• Failure to Appoint a Guardian for Minors or Others Requiring Care
• Failure to Plan for Incapacitation or Long-Term Care
• Failure to Take Tax Implications into Account
• Failure to Update a Plan After Major Life Events

Seeking Professional Assistance is Important for Your Eco-Friendly Home

Although creating a “do-it-yourself” estate plan is an option, financial expert Mark Hauser strongly recommends that an individual consult with an estate planning attorney. The lawyer’s professional guidance likely ensures that the plan reflects the originator’s preferences.