In estate planning, one common tactic individuals consider to avoid probate is adding their children…
Accidents and traumatic health events happen to people every day, even to the healthiest among us. For some, a health crisis is a short term problem, but for many others, entire lives are changed. Without an estate plan, which includes documents concerning incapacity, the consequences can be enormous, according to The Business Journal’s article, “Proper estate planning is as much about life as death.”
Make a plan. A will is a legal document that provides evidence of your wishes to those who will represent you after death as executor and provides instructions to that person on how and to whom to disburse the assets.
Power of Attorney and Revocable Living Trust. Without a durable power of attorney or a revocable living trust, financial institutions won’t speak with someone trying to help you with your financial affairs. If you’re critically injured or terminally ill and you have no end-of-life care instructions, your family won’t know how to carry out your wishes. A health care power of attorney can empower the person(s) that you choose to direct your medical care consistent with your wishes.
Beneficiary Designations. Life insurance, retirement plans, and financial accounts have beneficiary designations or are held as joint tenants. They, therefore, pass directly to someone else at death without probate. It is important that these designations are consistent with your overall estate plan.
Guardianship. If you have minor children, you need to designate your preference on guardianship. If you have young adult children or others dependent on you for care or financial support, there are trusts that can ensure this support continues during periods of incapacity and after death.
Taxes. You need to look at both income taxes and estate taxes when planning. Inheriting property is typically not a taxable event, but if you are liquidating certain inherited property—like an IRA or an annuity— it can result in a significant income tax bill. Proper planning can help minimize overall income and estate taxation.
Keep your plan current. Everyone has changes and life events. These changes can impact your family structure, financial situation, personal wishes, and new tax laws on your estate. Review your estate documents and your beneficiary designations regularly.
To protect yourself and your family, you should speak with a qualified estate planning attorney to ensure that the right documents are prepared for your situation. If you go with a “do-it-yourself” plan, you won’t know if the documents are correct. You may have saved some money, but the cost and problems of incorrect documents that your loved ones will have to deal with, will far outweigh any savings.
Reference: The Business Journal (March 1, 2017) “Proper estate planning is as much about life as death”