Estate Planning: Secure Your Future, Protect Your Legacy
Estate Planning is probably the least understood area of financial planning. It is also possibly one of the most important components of a solid financial plan. Many people think it is only for the rich, or it can be done later when you’re older. Neither of these are true or wise! There are many benefits to estate planning that are beneficial to you when you are alive.
Your estate is everything you own, minus everything you owe. Everyone has an estate!
Estate Planning
Estate planning is a well thought out action plan you can use to determine what happens to your assets, such as house, car, savings, businesses, and other valuables as well as your obligations, (debt) while you are alive and after you die.
It is very common for even people with a lot of financial resources to not have any plan in place when they become sick or die. You’ve heard of celebrities like Prince or James Brown that have plenty of money but failed to plan.
Therefore it is important for everyone to make sure that all of your resources are working, and that there are no gaps or weaknesses that will surface at the moment we need to be concentrating on other things such as your health and recovery.
A Will
This is one of your first lines of defense in estate planning. This is a legal document that outlines how assets are distributed, who takes care of children and pets, and other wishes you may have after you die.
An Executor
An executor is a trusted person you appoint to manage your affairs after death. You should make sure this person is competent and able to manage these affairs as they can become quite complicated. Appearing in court, getting inventory evaluations, debt information collection, valuable papers, are only some of the responsibilities that are required of the executor,
A Power of Attorney
Not only is it important to “get your affairs in order” in the event of death, but there are many estate planning tools to help you manage your finances while living. For example: A Medical Power or a General Power of Attorney.
A durable power of attorney can help you protect property in the event an individual becomes unable to handle financial matters. It also allows that person to authorize someone else to act on his or her behalf to do things like pay everyday expenses, collect benefits, watch over investments and file taxes. The power of attorney must be drawn up by an attorney. This is important. They will keep a copy on file. I would also suggest that the person you name is someone who has your best interests in mind as they will have access to your money. This person needs to be reliable, trustworthy and responsible. Taking the time to identify this person is imperative.
A Living Trust
A living trust (also known as a revocable trust) is a separate legal entity that protects property and investments. It’s called a living trust because it’s meant to function while a person is alive. The Trust is controlled by the person who creates it, and they can change the terms, transfer money, transfer property in and out of the trust or end the trust altogether. That individual can also name a co-trustee, such as a financial institution or a loved one to manage the assets in case he or she is unable to do so. Do not wait until you are in a crisis to set up a living trust.
Keep mind, there are many types of Trusts. Working with an Estate Attorney as well as a Financial Planner can help determine which one is right for you.
An Advanced Medical Directive
An advanced medical directive lets others know what medical treatment is desired, and it establishes who will make medical decisions for the individual in the event they are unable to make decisions for themselves. Depending on what’s allowed by the state in which the person lives, this document may also include a living will, a durable power of attorney or healthcare, and a do-not-resuscitate order.
Planning Ahead
Planning ahead for these things will allow everyone to know in advance what you want. It will allow expenses to be paid without interruption and can give you peace of mind as to how you want to be medically cared for in the event you cannot make those decisions for yourself.
It is possible to make sure you have your assets titled in a way that can help you manage your assets both before and after your death. If you have a lot of assets and different kinds of assets, a financial plan can be your first line of defense in pulling everything together. You should make sure the person you appoint as executor or successor executor as well as appointing a guardian for minor children are aware of your requests and have access to your documents.
Some estates are simple and others may be more complex, especially when you have blended families. I suggest talking to an estate attorney to give you direction. Planning now can save you thousands of dollars later.
You can prepare your funeral request in a will. As well as many other considerations.
Imagine the peace of mind you and your family will have when you have prepared in advance.
I know it isn’t an easy topic to dwell on, but making sure you have everything in order can save a lot of headache for you later and your family at your death. The financial and emotional cost of waiting is too high!
Sources:
American Bar Association, Real Property, Trust and Estate Law Section: https://www.americanbar.org/groups/real_property_trust_estate/
Trust and Will: What is Estate Planning? Estate Planning Basics Patrick Hicks, Head of Legal, Trust & Will: https://trustandwill.com/learn/what-is-estate-planning
Diahanna Vallentine, BCPA, Financial Empowerment Lead
In 2002 Diahanna and her husband received the news that her husband had MGUS, a precursor to Multiple Myeloma. Upon her husband death in 2013, Diahanna immediately decided to make it her mission to help patients and caregivers empower themselves to speak up and to position themselves as partners in their treatment. Diahanna became a Board-Certified Patient Advocate. She is currently the Financial Myeloma Coach for The Myeloma Crowd Foundation.