by Karla McAlister
Only about half of Americans have a Will according to a recent Forbes magazine article. Most people procrastinate because they do not want to actually think about what will happen when they die. It is important to plan and to make decisions or the state will make the decisions for you. State law directs how your assets are distributed if you die without a Will. The distribution depends on whether you are married or single and whether you have children. The distribution, according to state law may not be anything you would have chosen but it is what your family must deal with if you have not planned. It is especially important if you have minor children to make plans for the preservation of your assets to care for them. Provisions for a contingent trust for your children can be included in a Will or in a separate revocable trust document.
There are many different planning options and the proper option depends on your family situation, your assets and the complexity of your particular wishes. Taking the time to work through and complete a planning questionnaire helps ensure accurate advice about the options for your situation. Sometimes the right answer is a revocable trust which avoids probateand provides detailed instruction for the trustee to manage your assets for your family. Other times the proper planning may be a transfer on death deed and placing payable on death beneficiaries on your bank accounts.
Planning gives peace of mind:
- By specifying who gets what—especially items with emotional significance—you head off disputes.
- By choosing an executor and trustee if you use a trust to administer your estate, you put someone you trust in charge.
- By naming a guardian for your young children (under 18), you make it possible for the person you choose to raise your children if for some reason you and the other parent couldn’t. If you don’t make your preference known in your will (or in other legally effective document) a judge would have to choose a guardian without any knowledge of your wishes.
Your life insurance and retirement accounts, traditional IRA, Roth IRA, and 401K are distributed upon your death according to the beneficiary designation, not by the provisions of your Will or Trust. The law is complicated and it is important to discuss those beneficiary designations with an experienced advisor.
In addition to the basic estate planning tools of a Will and Trust, a Durable Power of Attorney, which names a person who can act in your behalf regarding your property, is a valuable document. This tool gives the agent the power to act on your behalf if you are incapacitated and need assistance or if you are unavailable to act. If you have a Durable Power of Attorney you will probably avoid the need to have a Guardian appointed if you unable to handle your own affairs. This avoids the cost and time associated with guardianship proceedings.
A Healthcare Power of Attorney allows the agent named to make healthcare decisions for you, if you cannot make them. It is useful if you are injured or incapacitated and unable to make healthcare decisions. An additional healthcare document is the Advance Directive for Healthcare that gives instructions to your physicians on end of life matters. It also names a proxy who can make decisions if you are not able to make them. It is essential in all of these documents to name people you trust as the agents, proxies, trustees, and personal representatives. They have great power but it also gives you great flexibility and avoids court supervisions of your affairs.