September 24, 2019
What does it mean to “do your estate planning?”
What does it mean to “do your estate planning?” Many people have this on their to-do list, but are unsure of what it actually means. In short, “estate planning” refers to the actions you take to ensure that you and your loved ones will be financially, medically, and legally protected in case you become disabled or deceased. Common components of an estate plan are listed below.
Durable Property Power of Attorney
Frequently referred to as a “power of attorney” or “POA,” your Durable Property Power of Attorney names one or more people who can make legal and financial decisions for you if you are alive, but incapacitated. The person(s) you name as your decision-maker is called your Agent. Many people mistakenly believe that their spouse or children “automatically” have the authority to do these things, but that is not true. No one can manage the legal and financial affairs of another person without the proper authorization.
Additionally, your POA must outline the specific powers that you grant your Agent. Not all POAs are the same – depending on what the document says, your Agent may or may not have the ability to take certain actions. For example, in Virginia, your Agent would not have the power to use your money to support your non-minor children unless you specifically listed that power. Therefore, it is important to make sure that your POA is tailored to your specific needs.
Medical Power of Attorney / Advanced Medical Directives
Your Medical Power of Attorney appoints one or more people to make medical decisions for you, if you are incapable of making your own choices. Like your POA, the extent of your Medical Agent’s authority will depend on the specific powers that you grant him or her. For example, in Virginia, your Medical Agent may not authorize your participation in experimental medical studies unless you specifically authorize that.
Your Advanced Medical Directives (also known as your Living Will) state your wishes about your health care. For instance, some people may have personal or religious beliefs that preclude them from receiving a blood transfusion or an abortion, even if such procedures would be necessary to save their lives. You can explain this in your Advanced Medical Directive. You can also explain the types of situations where you may or may not want to receive artificial life support. Finally, you can decide whether or not you want to be an organ/tissue donor after your death, or place limitations on the types of donations you consent to (perhaps you authorize donation for transplantation, but not for research).
Often, your Medical Power of Attorney and Advanced Medical Directives are combined into a single document.
Last Will and Testament
Your Last Will and Testament (your “Will”) pertains to the legal and financial management of your finances and legal matters after your death. The person you nominate as your Executor will oversee the implementation of your wishes. You will name your heirs and direct the final distribution of your estate assets. If you have minor children, you can nominate someone to be their guardian.
In some situations, a Trust may be the best tool to achieve a person’s estate planning goals. A trust can provide for the streamlined management of your assets throughout your life, incapacity, and death. For many people, a trust is not necessary. However, for those with substantial wealth or particular family dynamics, a trust may be appropriate.
Arranging your financial accounts
Though you may have the most brilliant POA and Will ever drafted, they will be of limited use if your financial assets are in disarray. For example, if you are thinking “I’m not sure what’s going on with my finances,” imagine how much hard it will be for your Agent or Executor to take over! I am amazed at how many people are unsure of “where their money is.” Remember, your Agent can only manage your assets if she can find them. Sorting through your finances and creating a comprehensive financial plan will give your Agent a solid foundation to work with.
Second, understand the consequences of joint ownership and beneficiary designation. If you own a bank account jointly with your daughter, she could remove those funds from your account before your Agent has a chance to secure them and use them for your care. If you have an insurance policy with a designated beneficiary, that beneficiary will inherit the policy upon your death regardless of what your Will says.
Therefore, it is critical that your finances are arranged in concert with your estate planning documents. Doing one without the other is not enough.
Contact our experienced attorney at The Heritage Law Group to create a customized estate plan for you and your family.