The numbers vary somewhat from survey to survey, but each new study that is released reveals that large numbers of Americans do not have a will. Not having a will is shorthand for not having any estate planning in place.
Lack of estate planning means that control of your medical decisions, your long term care, your finances and who gets your assets when you die will depend on state law and other people’s judgment instead of yours. Planning means deciding what is important to you and making sure the necessary documents are in place to guide your family.
Now is the time to review the tools available to ensure that the decisions that are made are yours.
Will. It does not get any more basic in estate planning than drafting a will. A will states who will receive your estate assets and care for your minor children upon your death. Without a will, state law determines who gets your assets - part of your estate may go to children even if you want your spouse to have everything to take of themselves. A will only operates after your death and only controls the assets you own individually in your name.
Beneficiary Designations. Beneficiary designations are usually completed the day the account or policy is set up or on the first day of work at a new job. When you designate a beneficiary on a life insurance policy, a 401(k) plan, or an IRA - it is a binding contract dictating who gets paid upon your death. Beneficiary designations need to be kept current because they can supersede the operation of your will. What this means is that if you stipulate in your will that you want to leave everything to your current wife and the beneficiary designation form still has your ex-wife’s name on it, your ex-wife—not your current wife--receives the benefit. Despite the explicit instructions in your will, the benefit will go to the named beneficiary on the account.
Financial Power of Attorney. Powers of attorney function during your life and expire when you die. A financial power of attorney (financial POA) gives a trusted individual the authority to handle your finances on your behalf if you become incapacitated or unable to make those decisions for yourself. If you become incapacitated and do not have a financial POA, the court may appoint someone to take care of these decisions - this process takes time and money. The court usually appoints a close family member, but that person might not be the one you would have chosen.
Advanced Healthcare Directive. Advance healthcare directives allow you to appoint an agent who will make medical decisions on your behalf if you are unable to do so for yourself and to state your treatment preferences should you become gravely ill. Your chosen agent will be able to access your medical records, speak with your medical caregivers, and deal with other important issues. Your designee will also make sure that your treatment preferences are carried out. Deciding if you want a feeding tube or be put on a ventilator or that treatment should be withdrawn are difficult decisions for loved ones. An advanced healthcare directive should clearly define what you want and what you do not want. Putting your wishes in writing takes the decisions out of the hands of your family and improves the odds that your final instructions are followed.
Living Trust. A trust established while you are alive can manage your assets if you are incapacitated and unable to do so. Living trusts are also referred to as will substitutes because any property in a trust is distributed according to your instructions upon your death. You can serve as trustee, and in the event, you die, become disabled or incapacitated or cannot manage your money for yourself, the successor trustee that you have chosen begins managing the trust without having to wait for court approval. Creating a trust is not complicated. You can implement simple methods like naming the trust as a pay-on-death or transfer-on-death beneficiary to fund the trust without having to take immediate action. These designations keep the property in the trust out of probate court. Trusts can save on court costs and delays, and allow you the flexibility to handle your affairs as long as possible.
Estate planning begins with spending time thinking about and talking with your family to prioritize your needs and wants for the future. Consulting an experienced estate planning attorney can help you explore issues and avoid pitfalls. Once you formalize your plan with the appropriate documents, review and update them regularly and anytime, you have changes in your life.
James M. Miskell received his law degree from the University of Georgia in 1993. His Asset Protection, Estate Planning and Elder Law practice have offices located in Lawrenceville and Johns Creek. He offers educational workshops and free consultations to assist clients as well as fellow professionals in creating individualized solutions. Visit his website: www.LetsTalkEstatePlanning.com. For more information, see his ad in this issue.