One aspect of financial literacy that many forget is legal in nature. You’ve seen the headlines and read stories about lives cut short unexpectedly, or freak accidents that incapacitate an individual or family member. The inevitable consequences and heartbreak for the families and loved ones left behind include leaving them unsure of what medical care you want, or what your final wishes are. Those questions can be addressed by you today. With a few simple steps, you can plan for the unexpected and ensure that your wishes, wants and desires are carried out and that your assets are protected. Regardless of your assets, whether large or very small, having these documents in place is critical to a smooth transition to ensure that your wishes are met. No matter what your age is, the time to start planning is now.
How do you get started? Meet with an attorney preferably with estate planning experience so that you can have the proper documents drawn up. At the minimum, consider a Trust or Will, Power of Attorney, and an Advanced Care Directive (living will). It is advisable to have your affair organized before the meeting to keep your expenses down.
Why these documents and what protection do they provide? Let’s go through them one by one.
Trust or Will
Trusts and Wills do basically the same thing, secure your assets and ensure that your last wishes are followed. But which is right for you? According to Jehan Crump-Gibson, co-founder and managing partner of Great Lakes Legal Group, “Not one size fits all. An estate planning attorney will work with you to decide which option will work best, with the ultimate goal of avoiding Probate Court.” Your attorney will work with you to determine the best estate plan option. For instance, if you do not own property but have various financial accounts, insurance, and personal property, a Will may be the right course of action. But if you own property in multiple states or in your name alone or have someone with special needs that you wish to care for, a Trust may be the best option.
Your attorney will work with you to ensure that you have an accurate accounting of all assets; that you have determined who you wish to bequeath money or property to; which, if any, charitable contributions you want to make; and how to best mitigate your estate taxes.
Should you die without either, then it can lead to a long, drawn-out time in Probate Court which could be both costly and time-consuming. “Your best option,” says Crump-Gibson “is to avoid Probate Court at all costs as it can be tedious, costly, and open to the public.”
Once your Trust or Will has been signed, witnessed and notarized, plan to meet with your attorney on a yearly basis. “Follow up with your attorney is important as nothing ever remains stagnant,” said Crump-Gibson. “You may buy or sell real estate, open new accounts, have additions to the family, all of which should be included in your plans.”
Power of Attorney
Simply put, a Power of Attorney is a legal document where you, the principal, give someone the power to act on your behalf, generally for financial decisions. A General Power of Attorney is broad in nature
and generally gives your designated individual the power to make all financial decisions while you are alive and have the capacity to make decisions and give advice. A General Power of Attorney ends when the principal dies.
A Limited Power of Attorney is less broad in nature and the rules of engagement are spelled out. You could use a Limited Power of Attorney to allow someone to represent you in a real estate transaction, to pick up your mail, or to buy and sell stocks, for instance. As the principal, you can specify a time limit for this document.
Advanced Care Directives
As with Powers of Attorney, there are numerous versions of Advanced Care Directives. The oldest one is a Living Will. It is a legal document that allows you to specifically state your wishes as to your health care at the end of your life. Often, people opt for the administration of “palliative” care (be made comfortable) while avoiding “extraordinary” measures such as CPR or ventilators.
A Durable Power of Attorney for Health Care, unlike many Living Wills, does not require that your condition be terminal in order to be enforced. Also, you will designate an individual to make health care decisions on your behalf. It is very important to have very honest and up-front discussions on your wishes with the person you designate as your agent.
Let you executor or another trusted person know where all your documents are. Consider renting a safety deposit box so that they will all be in one place. Or leave them in the hands of your attorney.
So many of us do all our business electronically with different accounts and their accompanying passwords, whether it’s banking, investments, loans, etc. It’s important to keep securely a listing of all accounts with the names of the institutions and updated passwords. Should anything happen to you, this will help your executor better handle your estate.
The time and effort you take now will save you and your loved ones heartache down the road, and, hopefully, it will be a very long road from now. Nevertheless, you can demonstrate your literacy by ensuring that your loved ones have your directives in advance to prevent the public display of your affairs whether you have acquired a fortune, or your financial matter appears to be extremely small. Your privacy should always be a large matter.