Like most people, you probably have set all sorts of goals for 2018.
Do these goals include: putting a plan in place for who will care for your minor children if you and your spouse passes away? Who will make financial and health care decisions for you if you become incapacitated? Who will receive your property in the event of your death?
If you believe planning for your family’s protection is important, perhaps the most important goal for 2018 should be to create an estate plan.
A basic estate plan typically includes a will or trust, and power of attorney for property management, financial decisions and health care.
Why is an estate plan important? Because if you do not make these decisions yourself they will be made for you by a court.
Why do you need a will? A will accomplishes three main objectives:
- To name a guardian for your minor children if both you and your spouse die. What decision could be more important that who will care for your child and manage his or her finances? Enough said.
- To name an executor of your estate to collect your assets, pay your debts and distribute your assets to your beneficiaries. The executor is someone you trust that is competent to carry out your wishes when you are gone. If your estate includes a business, your executor can also operate the business until the estate is settled. Without a will, the probate court will appoint an administrator, and the poor soul will have to guess his or her way through probate.
- To specify the people or charitable organizations that you want to receive your assets. In the absence of a will, your assets will be divided between your surviving relatives (this includes your spouse, children, step-children, parents and siblings) according to state law. This means the state dictates who will receive your property and in what proportion.
A will also gives you control over when your children will receive your assets.
If you die without a will, a court must appoint and supervise a guardian to manage any property your minor child receives from your estate, retirement account or life insurance policy, until the child turns 18. Wouldn’t you want to prevent the undesirable outcome of your child receiving a lump sum inheritance at age 18?
By setting up a trust in your will to hold your child’s share of the estate you ensure proper management of the funds you worked so hard to leave them until they reach a more mature age.
Why do you need a power of attorney?
What happens if you become incapacitated? Do you want your loved ones to have to ask a judge to name someone to manage your financial affairs? Wouldn’t you rather pre-designate that person and make sure they are prepared for this responsibility?
With a general (or “durable”) power of attorney, you name an agent to manage your property and financial affairs if you become incapacitated. A health care power of attorney appoints an agent to make health care decisions for you if you cannot act for yourself.
A spouse can make decisions regarding jointly held property absent a power of attorney; otherwise a court must appoint a guardian of your property to access your accounts to pay your bills, and make decisions regarding living arrangements and medical care.
Be proactive in 2018. Contact us to set up a consultation and take the necessary steps to protect yourself and your family.