Thousands of people have unexpected accidents or health events daily. There is also the potential that you may survive and be in a coma or incapacitated long-term.
The Business Journal’s recent article, “Proper estate planning is as much about life as death,” notes that the failure to plan can result in expensive and unintended consequences. Here a few key areas to consider.
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.
Proper planning involves working with a qualified estate planning attorney. While this may be an expense now, bear in mind that a “do it yourself” estate plan can mean higher expenses later.
Reference: The Business Journal (March 1, 2017) “Proper estate planning is as much about life as death”