Estate Planning is for Everyone
Estate planning is an often overlooked element of financial wellness. More than half of Americans (56%) do not have an up-to-date estate plan according to the National Association of Estate Planners & Councils.
To help the public better understand the importance estate planning has on the overall financial wellness of an individual or family, National Estate Planning Awareness Week was adopted in 2008. This year, it is held Oct. 21-27.
It’s important to remember that estate planning is for everyone. Don’t be tricked by these myths:
I’m too young for estate planning.
I don’t need a will because my property is titled jointly or payable/transferable upon death.
All of my assets are in order.
I don’t have enough money or assets to worry about estate planning.
Estate planning costs too much and takes too long.
Estate planning is simply a strategy created to grow, conserve, and transfer wealth and assets through the creation and maintenance of an estate plan. While this plan is intended to transfer your property and assets at death, special circumstances of the family and potential costs of different methods are also considered. Asking the right questions and taking steps toward basic estate planning now can save you and your loved ones time and money.
Every individual should have these four basic estate planning documents in place, regardless of age or how assets/ property are currently titled:
Financial Durable Power of Attorney
Durable Power of Attorney for Health Care
DO I NEED A WILL AND TRUST?
Wills and trusts are two of the most popular estate planning tools but are not mutually exclusive. While not everyone with a will needs a trust, anyone with a trust should have a will. Both wills and trusts allow you to spell out how your property is distributed, but they go far beyond that.
Almost everyone needs a will. Along with enabling you to determine the distribution of property, a will gives you the opportunity to nominate an executor and guardians for your minor children. If you fail to make such designations through your will, the decisions will likely be left to the court. Property distributed through your will is subject to probate, which can be a time-consuming and costly process.
Trusts differ from wills in that they are actual legal documents. Like a will, trusts spell out how you want property distributed. Trusts let you customize the distribution of your estate with the added advantages of property management and probate avoidance. While trusts offer numerous advantages, they incur higher up-front costs and administrative fees. The use of trusts involves a complex web of tax rules and regulations as well. You should consider the counsel of an experienced estate planning professional, and legal and tax advisors before implementing such strategies.
WHAT IS A DURABLE POWER OF ATTORNEY AND HOW ARE THEY USED?
Incapacity poses almost as much a threat to financial well-being as death does and, unfortunately, a devastating illness or serious accident can happen suddenly at any age. You may be left unable to manage your finances or health care directives.
A durable power of attorney is a legal agreement designating who will make your decisions if you become incapacitated. Otherwise, a relative or friend will have to ask the court to appoint a guardian. The person given authority is referred to as an attorney-in-fact, but doesn’t need to be an attorney. You can also terminate or change durable power of attorney as long as you have retained capacity, and even name the party or parties who determine whether you are incapacitated.
With a financial durable power of attorney, you can give as much authority over finances as you want, including but not limited to paying bills, writing checks, making deposits, selling assets, or otherwise conducting business.
Similar to the financial durable power of attorney, a health-care durable power of attorney allows you to designate someone to make health care decisions if you are incapacitated. The person can generally make decisions regarding medical facilities, medical treatments, surgery, and a variety of other health-care issues.
WHY DO I NEED A LIVING WILL?
The living will, also known as a directive to physicians or a health-care directive, spells out types of life-sustaining treatment permitted if you are incapacitated. The decision for or against life support is one only you can make. That makes the living will a valuable estate planning tool, and you may use a living will in conjunction with a durable power of attorney for health care. Laws governing the recognition and treatment of living wills may vary from state to state. It’s a better plan than trying to time when you jump out. If someone constantly makes wholesale changes, they usually end up chasing their tail. It’s not a good practice to follow and won’t help your investment portfolio. Instead, trust your advisor to make the tweaks that ensure consistent growth.
DO YOU HAVE OTHER QUESTIONS?
Estate planning is for everyone regardless of age, marital status, and asset size. Take the time this month to complete or review the four basic estate planning documents everyone should have: a will, financial durable power of attorney, a durable power of attorney for health care, and a living will.
Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2019.
Investments are not FDIC insured, not bank guaranteed, and may lose value.