Ah, estate planning. My grandparents are getting pretty old, so they should probably get that done. And my parents? They are pretty wealthy, so they should probably look into it as well. But me? I’m young! I’m healthy! And I don’t really have that much by way of assets, anyway. Clearly, I don’t need to worry about estate planning for a long time. Right?
Estate planning is simply preparation for the time
when you may be incapacitated or deceased.
Ask yourself the following questions:
- If I were to get in an accident today and be taken to the hospital in a coma, who would make the decisions about my medical care?
- If I were to get stranded in a foreign country while on vacation, who would make sure that my bills got paid?
- If my spouse and I were to pass away tomorrow, who would take care of our children?
- If I were to die and my life insurance passed to my 5-year-old son, who would manage that money for him until he was an adult?
As you can see, you don’t have to be old or rich to be faced with these problems. These are situations can arise at any time. Therefore, it’s best to get prepared now.
Your will has two primary functions. First, it determines what happens to your assets after you pass away. If you plan to leave a bequest to a person who is not fit to manage his or her own affairs (like a young child, an elderly person, or a person with disabilities), your will can include provisions that protect the management of the assets. A properly drafted will provides protection of assets and helps to reduce family conflict after you have passed.
Secondly, you can use your will to appoint the guardians of your minor children. It is important for you to know that your children will be properly cared for after you pass.
If you pass away without a will, your state’s law will determine where your money goes and the judge will decide where your children go.
Your Power of Attorney (“PoA”)
In this document, you name the person(s) or entity that will manage your finances while you are still living but unable to manage them yourself. This person is called your agent. So, for example, if you got lost in the Amazon, your agent could pay your bills, manage your income, and care for your assets until you came home. If you got in an accident and were in a coma for two months, your agent would handle all of your finances until you woke up.
If you fail to execute a PoA before you become incapacitated, your family will have to go to court to get appointed as your conservator. This is an expensive and time consuming process. It is far easier to execute your PoA now.
Your Medical Agent and Advance Medical Directives
In your Appointment of Medical Agent, you decide who will make medical choices for you if you are not able to make them yourself. If you do not create this document, the law determines who gets to make those choices.
In your Advance Medical Directives (a.k.a. living will) you make choices about the end of your life. This is where many people state their desire not to receive life support or other treatments after the doctors have determined that the situation is terminal. If you fail to execute this document, your family will likely struggle and/or disagree about this decision.
As you can see, estate planning is not just for the very old and very wealthy. Estate planning addresses problems that can arise for any of us, regardless of our age or economic status. Make it your goal this New Year to take care of your estate planning!