Take these steps to protect your family.
Take these concrete steps to establish an estate plan and consider what could happen if you become incapacitated before your death and are unable to handle your own affairs.
1. Make Your Will- If you don’t have a simple will, let us help you.
Children- If you have children under 18, name a personal guardian for them in your will. If both you and the other parent were unavailable, the local court would follow your wishes and appoint this person (absent a good reason not to) as guardian, to raise the children.
Assets- Your will directs who gets what after your death. You can make it simple—“everything to my children, to share equally”—or leave specific items to specific beneficiaries. You don’t have to leave anything to family members if you don’t want to, but if you’re married, know that a disinherited spouse could probably claim some of your assets.
2. Create Durable Powers of Attorney and a Living Will
Think about the possibility that at some time, you might become incapacitated and unable to handle your day-to-day financial matters or make healthcare decisions. If you don’t do anything to prepare for this possibility, a judge will appoint someone to have legal authority to act on your behalf.
To avoid an intrusive court proceeding, give someone you trust the legal authority to act for you. We do this for you by creating documents called durable powers of attorney, one for financial matters and one for healthcare. The person you choose is called your agent or attorney-in-fact. If you wish, you can even state that the documents won’t have any effect unless and until you become incapacitated. Once signed and notarized, it’s legally valid, and your mind can be at ease.
The documents you need are:
advance medical directive (living will)
durable power of attorney for health care
durable power of attorney for finances
A living will or advance directive gives directions to your health care providers about your wishes for end-of-life care, in as much detail as you wish. You might simply say that you want everything necessary to relieve pain (palliative care or comfort care) but don’t want to receive extraordinary measures such as CPR in certain circumstances. If you have a medical condition, you might go into more relevant detail.
You use a durable power of attorney (DPOA) for health care to give someone you trust the authority to carry out the wishes in your advance directive, and to make other medical decisions if necessary.
A durable power of attorney for finances gives someone authority over your assets. This can be a big benefit to family members—your spouse might need access to your checking account to pay the mortgage, for example. Without a DPOA for finances, your family would have to ask the court to appoint a conservator or guardian to handle your money, and submit to court supervision.
3. Check Your Beneficiary Designations
You’ve probably already named beneficiaries to inherit certain property from you. For example, when you signed up for a retirement plan at work or bought a life insurance policy, you were likely given a form on which to name a beneficiary. Now is a good time to revisit that paperwork. You should update your beneficiary designation periodically.
If you’ve named payable-on-death (POD) beneficiaries for bank accounts, vehicles, or savings bonds, check those designations as well.
While you’re at it, think about turning your other bank and brokerage accounts into payable-on-death accounts. It’s easy and free and will eliminate the need for these assets to go through probate after your death.
4. Living Trust
Probate court proceedings are an expensive, time-consuming hassle for survivors who just want to quickly transfer property to the people who inherit it. To spare your family the bother, consider creating a revocable living trust. This document lets everything go directly to the people who inherit it after your death, without the need for probate.
Like a will, and you can revoke or change a living trust at any time up until your death, as long as you’re mentally competent. But after your death, or if you should become incapacitated, the person you chose to be your “successor trustee” takes control of trust property, without court supervision. The role of the successor trustee is similar to that of the executor of a will; in fact, usually the same person is named to do both jobs.
It takes a little more work to create a living trust than it does to create a will. These trusts work very well for many families—and will save you a lot of money.
5. State and Federal Estate Tax Exemption Amounts
The vast majority of Americans don’t need to worry that their families will end up with a big state or federal estate tax bill. But it’s worth taking a look at the current tax laws, just so you’re sure. If you find that it’s likely that your estate will owe state or federal estate tax, get advice from a tax attorney bout your options. Ask us about special kinds of trusts or start a gift-giving plan to reduce the amount your estate will owe.