Estate planning is essential for numerous reasons.
Many people became more aware of the uncertainty of life during COVID.
The media constantly reminded people that death was possible and their livelihood and health were at risk.
Although there was a slight rise in people prioritizing estate planning, many still do not have an estate plan.
Within a 2023 survey, 75 percent of the surveyed individuals did not have an estate plan.
Only 28 percent of respondents over age 75 had an estate plan.
According to a recent Kiplinger article titled “Three Overlooked Benefits of Estate Planning,” postponing estate planning can cause havoc for you and your loved ones in the future.
Creating a comprehensive estate plan allows you to prepare for your financial, legal, and healthcare affairs to be taken care of in the case of incapacity or death.
What documents are typically involved in an estate plan?
The most well-known document is the last will and testament.
With this document, you can share who you would like to serve as your executor, how you would like your assets distributed, and who you select to rear your minor children as their guardians.
The second document is a trust.
A trust document creates an entity for holding assets to protect them from probate and allows you to give more detailed instructions for the distribution and management of the assets.
For incapacity planning, Durable Powers of Attorney, Advanced Care Directives, Medical Powers of Attorney, and HIPAA Authorization forms are essential for different purposes.
What does each accomplish?
The durable power of attorney is used to name a partner, spouse, or other trusted individual to manage financial business if something were to happen to you.
An advanced care directive allows you to designate the type of medical care you would like should you become incapacitated and unable to communicate your wishes to the doctors.
A medical power of attorney gives a trusted individual the authority to make medical decisions for you when you are incapacitated.
A HIPAA authorization grants another person access to medical and insurance records and the authority to talk with physicians and other healthcare workers about your condition.
Why should a person prioritize the creation of an estate plan?
An estate plan provides some security during incapacity.
When people are healthy, it is difficult to imagine being unable to care for themselves or communicate their own wishes.
While incapacity is less likely for younger individuals, it is fairly common for seniors.
Alzheimer’s and other diseases occur more frequently in older adults.
By preparing for incapacity through estate planning, you can rest assured your bills will be paid, your household will be managed, and your doctors will have direction without having a court proceeding to grant a conservatorship or guardianship.
An estate plan makes your wishes legal.
Those who do not have a last will and testament may communicate who they would like to inherit specific assets, but these wishes are not legally binding.
Instead, the state will choose how your property will be distributed.
States have different laws governing these distributions to relatives.
How the government divides assets will not necessarily align with your desires.
If you have a last will, you should regularly review and update it.
If you have failed to do so, your executor may no longer be capable of serving in this role.
As a result, the state will have to choose an administrator for your estate.
Other issues can arise if you have divorced and have not updated retirement accounts, life insurance policies, and your last will.
Your ex could inherit everything.
A phone call should be made to your insurance agent or estate planning attorney immediately following significant life changes.
An estate plan can help you avoid probate.
Probate is the process governing the administration of an estate under the supervision of the local court.
The last will must be filed with the court and approved by the judge after review for the estate to be administered.
These documents become part of the public record.
In some jurisdictions, a simple online search of the government archives can produce these documents.
If privacy is highly important to you, a trust is a wise choice.
It allows you to maintain privacy, have greater control over assets, and may even help minimize creditor and tax liability.
Whatever your goals, estate planning is an essential step in preparing for what the future might bring.
Reference: Kiplinger (September 6, 2023) “Three Overlooked Benefits of Estate Planning”