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3 Things Estate Planning Documents Should Do
Handle your affairs when you’re incapacitated
If you become sick or suffer a debilitating injury & become incapacitated or if you are in a coma & lack the ability to manage your own affairs, very few people unconscious in a hospital for long periods of time can pay bills and deal with their finances.
You need someone who has been legally authorized to act for you is needed.
This is where a Durable Power of Attorney comes in to play. You can sign a Power of Attorney while you’re competent and appoint a person to be your “agent”.
If you don’t do this and are incapacitated, your loved ones have a problem. They can’t act for you without first going through a lengthy court process to be appointed as your Conservator.
If you do sign a Durable Power of Attorney, the person you assign as your agent, will be able to deal with your bank, credit union, or other financial institutions to ensure that your bills are paid.
It is always nice to recover from a long stay in the hospital in a house that wasn’t foreclosed on because your agent was able to use your savings to pay the bank.
Transfer Assets to your loved ones when you die
Unfortunately, everyone will die at some point. Your loved ones will already have a lot on their plate and they shouldn’t be left struggling with your affairs because of your lack of planning.
As part of any good estate plan, you should check all of your financial accounts (savings, checking, money market, mutual funds, insurance policies, IRA’s, etc.) to ensure that you have named the correct beneficiaries. If you opened an account many years ago and have since gotten married, divorced or had children, your beneficiaries need to be updated.
A Last Will and Testament is a necessity for you if you have children under 18 years old.
This is the place to name the people you want to take care of your kids if you’re gone.
A Will is a set of instructions to the Court from you. If you don’t have one, the Court won’t know what you wanted. A judge doesn’t know your kids or who would be best to care for them; you need to have a Will to make your wishes known.
A Will is also the traditional place for naming the people who you want to receive your assets upon your death. This is what most people think of when first beginning the
Estate Planning process. Having a Will naming beneficiaries is much better than having no Will and letting State law control your estate.
A Will as part of a larger Estate Plan is better still. Many Estate Plans would benefit from a Revocable Living Trust in addition to a Will. A Will must go through the Probate Court process. This may take many months and can be very costly. A Trust avoids probate entirely and generally costs your Estate much less than Probating a Will.
Keep those transferred Assets from harming your loved ones
You want your assets to benefit your loved ones, everyone does. You want your loved ones to actually receive as much of your Estate as possible, without Probate costs, attorney fees or taxes. Your Estate Plan should also make sure that your loved ones are benefitted by your assets and not harmed.
- If you leave a lump sum of money to someone who happens to be in their twenties, it is a good bet that the money will be spent quickly and less than wisely.
- If someone is disabled and receiving means-tested governmental benefits, even a small amount of assets could cause their benefits to be lost.
- If you leave someone with dependency issues any amount of cash, it is almost always a bad idea and ends poorly.
- If a beneficiary is under the age of 18, there is always a question of if the assets will be used properly.