Everyone should have an estate plan in place. Yes, that includes you! An estate plan gives you the power to transfer assets to whom you choose and to identify trustworthy people who can make important decisions for you. It provides instructions for your loved ones and will minimize their stress during a difficult time. An estate plan empowers you by making your wishes known.
Each person’s situation is unique, and you should always talk to an estate planning attorney to determine which documents are essential for you. However, there are some key pieces to an estate plan that are necessary for everyone.
When There’s a Will, There’s a Way
Most people think of a will when you mention the estate planning, and it is a vital component of your blueprint. A will provides instructions on how you would like your property distributed, and if you have children, it includes guardianship information. When you write your will, you get to decide who receives your assets, which charities receive gifts, and, perhaps most importantly, who should care for your children.
Without a will, the state and probate court will distribute assets based on state laws. Their succession plan for guardianship for your children and ownership for your prized possessions may be very different than your personal wishes.
Sharing Your Powers
A will authorizes people to act on your behalf after you pass away, but what if you need assistance with making decisions while you are alive? That is when a Power of Attorney plays an important role. There are 2 types of Power of Attorney documents that should be included in every estate plan: a Health Care Power of Attorney (HCPOA) and a Property or Financial Power of Attorney (FPOA).
With a HCPOA document, you will name an individual who can discuss your medical condition with your doctor and make decisions for you. An FPOA works in a similar way for your financial assets by granting authority to an individual who can talk to your bank or financial advisor on your behalf. The Power of Attorney can be activated when you are no longer able to make your own decisions or during a medical emergency, such as a car accident. You can choose different individuals to fill these roles for you, but be sure to give them a copy of the document so they are prepared to assist you.
So Now What?
The next step is to reach out to an estate planning attorney. They will help you determine what is needed for your specific situation, such as a trust or tax planning, and then they will prepare all the necessary documents.
You need an estate plan so you can be in charge of these important decisions. Formalizing your instructions and wishes into a plan will make life easier for your loved ones in the future. Talk to your financial advisor to review your assets and to prepare for an efficient meeting with your estate planning attorney.
Terri Velgara, CFP®
Terri is a Financial Advisor and Director of Financial Planning at Rappaport Reiches Capital Management. She serves as a resource for our firm's advisors in designing plans that empower clients to achieve their personal and financial goals. Please connect with Terri below. She loves to talk about investing, financial planning, and family game nights!