Many people spend more time planning a vacation than they do thinking about who will inherit their assets after they pass away. Although estate planning isn’t an enjoyable activity, without it, you don’t get to direct who gets everything for which you’ve worked so hard.
Investopedia asks you to consider these four reasons why you should have an estate plan to avoid potentially devastating results for your heirs in its article “4 Reasons Estate Planning Is So Important.”
Wealth Won’t Go to Unintended Beneficiaries. Estate planning may have been once considered something only rich people needed, but that’s changed. Everyone now needs to plan for when something happens to a family’s breadwinner(s). The primary part of estate planning is naming heirs for your assets. Without an estate plan, the courts will decide who will receive your property.
Protection for Families With Young Children. If you are the parent of small children, you need to have a will to ensure that your children are taken care of. You can designate their guardians, if both parents die before the children turn 18. Without a will and guardianship clause, a judge will decide this important issue.
Avoid Taxes. Estate planning is also about protecting your loved ones from the IRS. Estate planning is transferring assets to your family, with an attempt to create the smallest tax burden for them as possible. A little estate planning can reduce much or even all of their federal and state estate taxes or state inheritance taxes. There are also ways to reduce the income tax beneficiaries might have to pay. However, without an estate plan, the amount your heirs will owe the government could be substantial.
No Family Fighting (or Very Little). One sibling may believe she deserves more than another. This type of fighting can turn ugly and end up in court, pitting family members against each other. However, an estate plan enables you to choose who controls your finances and assets, if you become mentally incapacitated or after you die. It also will go a long way towards settling any family conflict and ensuring that your assets are handled in the way you wanted.
To protect your assets and your loved ones when you no longer can do it, you’ll need an estate plan. Without one, your family could see large tax burdens, and the courts could say how your assets are divided, or even who will care for your children.
Reference: Investopedia (May 25, 2018) “4 Reasons Estate Planning Is So Important”
Statistically, we know without a doubt that we are all going to die. That’s 100% certain. However, we know that the chances of becoming disabled are also high. For that reason, everyone should have a Power of Attorney, or POA, as well as a will. In fact, says nwi.com in the article “Estate Planning: 3 important estate planning docs, and 2 maybes,” everyone should have a POA, a will, an advanced medical directive and more specifically, a living will.
How many times have you heard the story about someone’s aging mom becoming disabled and the hospital asking if she has a POA? The problem is we’re so reluctant to ask mom about a POA, that we tend to neglect this difficult conversation. Then, when we are faced with a medical emergency, it’s too late.
The time to have a POA created, is before an emergency or health crisis, not afterwards!
In a medical emergency, people are actually far more likely to become disabled or incapacitated than they are to die. Therefore, you need a POA.
The living will is equally important to have in advance of an emergency. With a living will to provide instructions for when you are terminally ill, and death is expected to occur in the very near future, you will have had the opportunity to state your wishes regarding medical care in advance.
A living will should be part of your estate plan.
The related document, which is not as well known, is the “life prolonging procedure declaration,” which says, in a nutshell, “Do everything you can to keep me alive, because I’m not leaving until I absolutely have to.”
The third must-have estate planning document is a will. The will is the document where you tell your heirs exactly how you want your assets distributed. If you have children who are not yet of legal age, you name a guardian for them in your will.
One “maybe” document is a trust. Trusts are used to protect assets. There are many different types of trusts. An estate planning attorney, the same one who will help you with your POA, living will and will, can also help with trusts, if you should need one. They are not simple to set up and you’ll want to get the one that best fits your needs.
Another document is called a “letter of instruction.” This is a set of directions that you leave to your family that tells them what you would like to happen. It’s not legally binding, so it falls into the “maybe” document category. However, you may find it satisfying to put down on paper what you would like them to know, what you would like them to remember, etc.
If you want to dictate your funeral, memorial services and the like, work with an estate planning attorney to execute a funeral planning declaration. This document can be legally enforced.
Remember, the laws about estate plans vary by state, so you’ll want to speak with a local estate planning attorney to ensure that your wishes, your documents and your estate plan will be properly prepared.
Reference: nwi.com (Nov. 25, 2018) “Estate Planning: 3 important estate planning docs, and 2 maybes”
An important part of estate planning is a medical directive. This can include a living will, which details your wishes for end-of-life care; and a health care power of attorney that appoints a person to make medical decisions, if you’re unable to do so. A medical directive addresses important issues that are inevitable. However, many people just don’t want to think about them or discuss them with family. As a result, they’re left for to family members and medical providers to work through without any guidance.
The Watertown Public Opinion’s recent article, “Keep medical directives up to date,” says that it’s not uncommon to find situations, where medical directives that were valid when they were executed, become potentially useless. A family member could choose to make end-of-life decisions but then fall victim to dementia, which impacted their competency to make those decisions.
If your medical directive names your spouse, you should also name an alternate since your spouse, who’s aging along with you, may not be the best person to make hard decisions when the time comes.
In addition, you should communicate your specific wishes to both your primary and alternate designees. Ask them if they think they’ll be able to carry out your wishes. These conversations aren’t easy, but they’re essential.
On one hand, it may not be really hard for a family member to consent to become the designated representative in a medical directive. However, if the agent named in a healthcare power of attorney is in good health, the need to make hard decisions is somewhere in the future and can feel almost theoretical. When a medical emergency or an extended final illness occurs, a family member who’s frightened, grieving, and exhausted may then find actually making those decisions to be the toughest thing they’ve ever had to do.
You should provide your family with clear directions to make end-of-life decisions for you. This means you need to do more, than simply write their names into a document.
It requires selecting a person who’s willing to carry out your wishes. Tell that person about your wishes in a robust and meaningful conversation, and check in periodically to make certain they remain willing and able to carry out the solemn promise that a living will entails.
Reference: Watertown Public Opinion (November 20, 2018) “Keep medical directives up to date”