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Some Basic Estate Planning May Be a Smart New Year’s Resolution

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NewYears2011.jpgDo you have an estate plan?  If not, you may be taking an unnecessary gamble with your family’s future.  The goal of this article is to highlight the importance of basic estate planning most people need and something many of you may have been avoiding for too long.  Maybe it’s time to put it on the New Year’s resolution list. 

In the meantime, consider the following:  

 

Do you know who will care for your children if something happens to you? 

Without a formal nomination of a guardian for your minor children, a court may be faced with competing arguments about which family member is best-suited to care for your children.  Such a controversy can be the source of a great deal of stress that may be played out in court.  The result may not be what you’d hoped.  A properly prepared will should have the guardian nomination and should have at least a secondary nomination in case the primary nominee is unable or unwilling to act when the time comes.  A properly prepared will should also prevent the necessity of having two probate proceedings for parents that die at the same time.  There is also a lot to discuss in terms how you can influence the kind of care and support that your children would receive.    

If you get sick or hurt and lose your ability to make decisions, how will your spouse or loved ones deal with your financial affairs and medical decisions? 

The most commonly used documents to plan for incapacity include the advance directive for health care and the durable power of attorney.  The advance directive serves two primary purposes.  It allows you to make decisions in advance with respect to end of life decisions, including the use or non-use of artificial life support in instances such as terminal illness and permanent unconsciousness.  In addition, it allows you to nominate a health care representative to make decisions on your behalf when you are unable.  Providing this type of direction for family members is the best way to ensure your wishes will be honored and to alleviate a great deal of stress on loved ones. The durable power of attorney will allow a trusted loved one to deal with your financial affairs without having to petition the court to open a conservatorship proceeding.  A conservatorship is an expensive and court-supervised process that can be avoided with proper planning.   

What else should be covered? 

People understand that a will is a tool used to provide for the orderly distribution of estate assets.  But, it is important to realize that many assets will never be subject to your will.  Most commonly, major assets such as retirement accounts and life insurance proceeds will ordinarily be distributed in accordance with beneficiary designations instead.  When was the last time you reviewed those designation documents?  Have you named a backup beneficiary in case your primary beneficiary does not survive you?  Have you considered the potential income tax effects that may result for a given beneficiary? Have you named a minor child as a beneficiary?  A minor cannot control funds, but a court-appointed conservator can until the child turns 18.  This is generally not a preferred result for most people.  To prevent the 18-year-old beneficiary from visiting his or her nearest car dealership, a parent may direct that funds be managed in trust for the beneficiary until a later time.

A consultation with an estate planning attorney can be an eye-opening experience and will cover these issues and generally much more.  Most people should, at a minimum, have a will and should consider giving a spouse or other trusted loved one a durable power of attorney and power of attorney for health care.  A simple will together with these documents cost less than most people think and most estate planning attorneys will gladly quote you a flat fee.