Would you be surprised to know that 50 percent of Americans with children and 41 percent of baby boomers age 55 to 64 do not even have a simple will? Perhaps you are one of those folks flying naked (in an estate planning sense, that is)? To paraphrase Dr. Tom Nelson, we are all walking on the tightrope of time stretched out over the great chasm of eternity with death stalking us at every step.
A rather thoughtful assessment of the precarious state of our temporal experience
So, if death is a 100% certainty on the actuarial tables of every life insurance company, then perhaps preparing your own will makes sense, yes?
While you are at it, every will has at least four "friends" you should also bring with you on your own "tightrope" walking experience.
In fact, a recent CNBC article, titled "Stay in control with 5 estate-planning documents," discusses the importance of having the will and his (or is it her?) friends in tow.
While I recommend reading the original article, here is what you need to know:
A will. It does not get any more basic in estate planning than drafting a will. A will states who will inherit your estate assets and care for your minor children upon your death. As you may recall from previous posts, without a will, the "intestate succession" laws of the state where you live decides who gets your assets and when.
The court will typically disburse the inheritance based on their degree of family relationship to the decedent (i.e., you). Commonly, this degree moves from your spouse, then to children, then to your parents, and next to your brothers and sisters. Ulitimately, if you do not have anyone in this line-up within certain degrees of "consanguinity," then other distant relatives you may never have known will make their claims. If there is still no one to claim the money as a relative, then the state will just keep it! By the way, the legal term for your estate passing to the state treasury is "escheat." Sounds appropriate.
Why give gifts to people you hardly know or forfeit your estate to the state when you can avoid it simply by creating a will to tell everyone in writing who gets what when you are gone?
Beneficiary designations. This seems like a pretty insignificant little form, but it can be huge when it comes time to disbursing your life insurance policy or any retirement account. Chances are you probably completed and sent in a beneficiary designation form when you took out the policy or opened the account. That form identifies who gets this money when you die. This form—not your will—says who gets the money. Note: this cannot be stressed enough. YOUR WILL DOES NOT CONTROL ANYTHING PASSING BY BENEFICIARY DESIGNATION.
The original article suggests that you check your list of beneficiaries when there were any life changes, like getting married or divorced, having a child, or having more children.
Financial power of attorney. A financial power of attorney (financial POA) is another very critical legal document. It gives a trusted individual the authority to resolve your financial issued on your behalf, if you become incapacitated or unable to make those decisions for yourself. A financial POA provides you with more control over your financial affairs and a better chance that your wishes will be followed.
If you do not have a financial POA, the court selects someone to take care of these decisions—this can be a very lengthy and expensive process. The court usually appoints a close family member, but that person might not be the one you would have chosen. You know, the one who constantly "borrows" from other family members and may have filed for bankruptcy a few times.
The original article also stresses that a financial POA is critical if you have a non-spouse partner: if you designate your financial POA, you have control over the scope of powers to grant your "agent," which can encompass accessing your financial accounts and managing all your financial affairs.
Medical power of attorney. A Medical power of attorney allows you to select who will make medical decisions on your behalf, if you are unable to do so for yourself. Your chosen designee will be able to access to your medical records, speak with your medical caregivers, and deal with other important issues. Your designee will also make sure that your "advanced medical directive" is carried out.
Advanced medical directive. Deciding if you want tube feeding or to be put on a ventilator can be a really hard decision for loved ones to make, if you have not put your wishes in writing. An advanced medical directive should clearly define what you want and what you do not want. This takes the decisions out of the hands of your family and improves the odds that your final instructions are followed.
Once you get these documents set up, the original article suggests that you review and update them from time to time, especially if you have had any changes in your life.
These are just the basics. You should talk to an experienced estate planning attorney and get sound advice for all of your estate planning issues.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
Reference: CNBC (October 6, 2014) "Stay in control with 5 estate-planning documents"
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