You need an estate plan. This is true even if you don’t have a lot of assets. It’s also true if you’re young, or if you don’t have close family members. Estate planning means preparing for the inevitable end of life.
People get sick or hurt, and you need a plan in place to determine what kind of medical care you’ll receive if this happens to you. People become incapacitated, unable to make important decisions on their own, or unable to live independently. And of course, people die.
Estate planning helps to protect your family and your assets in any of these unfortunate situations.
Unfortunately, far too many people don’t know what a complete estate plan includes or how to go about creating one. Making an estate plan involves way more than writing up a will, and you should ideally get legal help with it so you can use the right estate planning tools in the right way.
If you’re unsure of where to get started, or if you want to learn about the different documents used in estate planning, this guide will help. The basic elements for estate planning include having a Will, A Medical Power of Attorney, and a Financial Power of Attorney.
A will is one of the most important documents you will ever write. It is your opportunity to record your wishes for how you want your property and personal things to be distributed when you die. Each state has legal requirements to follow, otherwise the will may be held to be invalid. Generally, a will has to be filed with the local court when you die. It becomes public record as the court orders the transfer of legal title to property from one person (you) to another person (a beneficiary named in your will).
You will need to name an executor in your will. This is the person who steps in after you die and handles things how you directed in your will. This person can be a friend, relative, or trusted professional. Executors are entitled to a fee for serving as an executor. Ask someone that you trust to handle the distribution of property after you die.
If your children are minors, it is necessary to name who you wish to be their guardian in your will. You can also record your wishes for your pet. The person should be asked beforehand if they are willing to take on the responsibility for children or pets. It’s also important to ask your executor if they are comfortable with the responsibility of handling your estate or serving as a guardian for children. Children will also likely need financial support and someone to handle it for them. Minors (under 18 years old) cannot inherit money directly, so you may consider using a legal tool called a Trust, to hold their money for them and make sure it is managed. (I wrote another article on the difference between a will and a trust.)
It is best to use the services of a lawyer of your own choosing when making out a will. All documents should be read and understood before you agree to sign them. If you have been forced or coerced into signing a will or any other document, contact your local police.
Medical Power of Attorney & Financial Power of Attorney
One way to protect yourself and your assets is through the use of a Power of Attorney. A Power of Attorney is a legal document which names a person (or persons) you choose to act for you if you cannot The naming of a person in a Power of Attorney document is important. It can be a spouse, a relative, a friend or a professional you trust. The person you have named is required to act in your best interest and following your wishes.
Among other requirements, you must be mentally capable at the time you sign a Power of Attorney for it to be valid. In general, to be mentally capable means that you are able to understand and appreciate financial and legal decisions, and the consequences of making these decisions. However, the legal definition of mental capacity will vary depending on your state’s laws.
There are two kinds of Power of Attorney, a Medical Power of Attorney and a Financial Power of Attorney.
A Medical Power of Attorney means someone else can make medical decisions for you, such as requesting or rejecting treatment, talking to your doctors, and making medical decisions according to your wishes.
A Financial Power of Attorney can be limited to one property or account, or it can be broad powers that allow someone to access and control your finances. They do not take ownership of your money, they are provided authority to access and use the funds according to your wishes. Generally, a financial power of attorney will be needed when a adult child begins handling an elderly parents’ bills for them. A Financial Power of Attorney expires upon your death.
A Power of Attorney for Medical decisions is called a “living will.” In the living will, you will decide what kind of medical treatment you would want in the hospital.
For example, you can state if you want every possible treatment to live longer. Other people say that if their heart stops, they do not want CPR to revive them. It is your decision. Outlining your wishes ahead of time will make it easier for your doctor and your family. Make sure that the person you list will be emotionally strong and able to follow your wishes.
The person you choose acts as your “Agent.” The Agent can make personal care decisions for you such as health care, personal hygiene, nutrition, shelter, clothing and safety. Stating what you want clears up any misunderstandings and avoids family drama.
You can change the listed person for your Power of Attorney any time before it goes into effect. It only takes effect if you become incapable of making decisions for yourself.
Unless you limit the person’s authority, they can do almost everything with your finances that you could do. If you don’t have any limitations in your Power of Attorney document, your Agent can do your banking, sign checks, buy or sell real estate or stocks in your name, and buy consumer goods using your credit. They do not become the owner of any of your money or property. He or she only has the authority to manage it on your behalf.
Your Agent under a Power of Attorney cannot make a will for you, file for divorce, transfer property to themselves, change your existing will, change a life insurance beneficiary or give a new Power of Attorney to someone else on your behalf.
If you have any further questions, or you are ready to get started and want me to help, contact me.