National Estate Planning Awareness Week: 6 Simple Steps You Can Take Now to Protect Your Loved Ones

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Ryan M. Bray, MST, CPA - Bader Martin PSIt’s not always just about the numbers. And it’s definitely not just for the uber rich and the elderly.

An estate plan also protects your loved ones in the event that you become incapacitated or die unexpectedly.

National Estate Planning Awareness week was October 15 – 22, 2012—an important reminder of the critical role that your estate plan plays in securing your legacy and your family’s financial future. 

Unfortunately, more than 120 million Americans either don’t have estate plans or have plans that are significantly out of date.

The solution to this problem doesn’t have to be time-consuming or expensive. There are certain basic steps that every responsible person—no matter their age or financial status—can take to protect their loved ones. Something as simple as naming a beneficiary on your investment account, for example, can streamline access to the funds and avoid potentially lengthy probate.

Under the best of circumstances, you’ll develop and maintain your estate plan with the help of your attorney and accountant as part of an ongoing planning process.

That said, if you don’t have an estate plan—or you have one that’s significantly out of date—the following are steps you can take in the interim to provide basic protections.

1. Verify the primary and secondary beneficiaries on your financial accounts

When you designate beneficiaries for your financial accounts—including retirement accounts, life insurance policies, payable-on-death bank accounts, brokerage accounts, securities and various other types of investments—you’re determining who will receive those assets in the event of your death.

If you don’t want to leave a retirement or brokerage account to a former spouse or an estranged friend or family member—which has been known to happen—name a beneficiary. You might also consider naming secondary beneficiaries for these accounts, in case the primary beneficiaries you choose predecease you.

Because circumstances change, it’s important to review all of your beneficiary designations on a regular basis, especially if there’s been a marriage, divorce, remarriage, or death in the family.

Don’t think that an updated will protects you from outdated beneficiaries. If a beneficiary designation is contrary to the terms of your will, the beneficiary designation generally prevails. That means you should coordinate your choice of beneficiaries with the provisions of your will—and your estate plan, as naming the wrong beneficiaries can defeat your estate planning.

As an added incentive to naming beneficiaries for your financial accounts, doing so allows the assets to pass directly to your beneficiaries, without passing through probate.

2. Prepare a health care directive and durable power of attorney for health care

If you become incapacitated and cannot make your own medical decisions, you can still convey your wishes to your doctors and loves ones with a little advance planning that includes the following signed documents.

A health care directive, or living will, informs your family and your health care providers of your wishes when it comes to withholding or withdrawing life-prolonging medical treatments, such as the use of a respirator or artificial hydration. The health care directive applies only in the event of either a terminal condition or a permanent unconscious condition.

A durable power of attorney for health care authorizes a specific person that you trust to make medical decisions on your behalf if you aren’t in a position to make or communicate them yourself. This person can ensure that the wishes expressed in your health care directive are followed and can access and use your health care records as necessary—an important authority in light of federal privacy rules under the Health Insurance Portability and Accountability Act, or HIPAA. 

A Physician Orders for Life-Sustaining Treatment (POLST) form expands on the information in your health care directive to provide more detailed instructions and instructions relevant to a broader range of circumstances.

If you don’t have a health care directive or durable power of attorney for health care, you can find the forms online. The laws vary from state to state, so choose one that conforms to the rules in your state. A physician can provide you with the POLST form, which must also be signed by a physician.

3. Create and sign a financial power of attorney

A financial power of attorney authorizes a specified person that you trust to manage your finances in the event that you are unable to manage them yourself, even temporarily. The person you designate can write checks, make deposits, manage investments and sell property, as necessary.

Without a financial power of attorney, your loved ones will likely have to ask a court for the necessary authority to manage at least some of your finances, even if you’re married and own the majority of your assets jointly.

4. Name a guardian for your minor children

One of the most important things you can do to ensure your children’s future is to choose a loving and responsible guardian who will care for them if you can’t.

The guardian you choose must be an adult—someone capable and willing to take on this important responsibility. You should also choose an alternate guardian, in case your first choice ultimately can’t take on the duties required.

Be sure you discuss your intentions with potential guardians and gain their agreement before you make it legal. They need to understand the financial implications—for example, whether the children have trusts or inheritances to provide for their support. Guardians also need to know any preferences you may have with regard to raising the children, such as an important family or religious tradition or attendance at a specified private school.

The legal process of naming a guardian is pretty straightforward. Just include in your will the name of the person you wish the court to appoint as your children’s legal guardian. Of course, this means you need a will.

5. Prepare your will  

It’s pretty simple. If you die without a will, the government generally decides who gets your assets. And if you have minor children, a court will decide who cares for them and manages their finances.

If these are not circumstances you’re willing to accept, you need a will. Although legal documents to prepare a will are available online, this is a step you really shouldn’t take yourself. Consult your attorney.

6. Assemble your documents

If you become temporarily or permanently incapacitated, or in the event of your death, your family and important advisors need access to a range of personal, financial, and legal records—whether in print or digital format.

It’s vitally important that you organize your records and that you make sure your family members and advisors know where and how to access to them should it become necessary.

To help you with this important task, we’ve created a Lifetime Planning Checklist (in MS Word format) that provides an overall framework for gathering and recording your information. You can download the checklist from our website—it’s posted on the eLibrary Resources page in the Tools section. Or you can request a copy from your Bader Martin advisor. 

About Ryan M. Bray

Ryan Bray is a senior manager in Bader Martin's tax practice and is a member of the firm's high net worth and family business practice groups.
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