Having a Really Bad Day – Putting in Place a Basic Estate Plan
While most of us do not like to think about our mortality, it is a topic that we will all have to face some day. One of the most important parts of the financial planning process is addressing the issue of estate planning. While estate planning can be extremely complicated, there are four key components that you should have in place: a will, a health care power of attorney, a living will, and a financial power of attorney.
Rule #6 – Make sure you have a will, a durable power of attorney for health care, a living will, and a financial durable power of attorney.
Let’s take a look at each of these:
A will is a legal document that describes what should happen when you die. Some folks think that they don’t need to worry about this if they don’t have any children and/or if they have limited property. Nothing could be further from the truth. If you die “in-testate” or “without a will”, there’s a process – dictated by the state you live in – that will be triggered. That process may, or may not, divide your estate in the manner you feel is appropriate. A basic will addresses:
- Who should receive your property
- Who should be responsible for your minor children
- Who will be responsible for the property you leave to the minor children
- Who will be the executor of your estate
The second key component is a health care power of attorney. A durable power of attorney for health care addresses:
- Who has the legal right to make decisions on your behalf if you are incapable of making such decisions
The third component is a living will. This document addresses:
- What kind of medical care you want – and do not want – when you become incapacitated
The final component is a financial power of attorney. A durable financial power of attorney describes:
- Who can make financial decisions on your behalf when you become incapacitated
A couple of key points on each of the above documents:
- While you can certainly draft each of these documents on your own, doing so is not without risk. Poorly drafted or incomplete documents can result in significant repercussions. My guidance is to seek the help of an estate planning attorney in completing these documents.
- Each of the documents can be changed and/or amended at any point in time; and, it is a good idea, to review these documents (i) at least annually and (ii) whenever a life change (e.g. birth of a child, marriage/divorce, relocation, etc.) takes place.
ACTION ITEM – Put in place a will, a durable power of attorney for health care, a living will, and a financial durable power of attorney.
[author] [author_image timthumb=’on’]https://www.f5fp.com/wp-content/uploads/2012/02/100_3458-Cloned-background-1-214×300.jpg[/author_image] [author_info]F5 Financial Planning, L.L.C. (F5FP) is a comprehensive, fee-only, financial planning firm serving Naperville and surrounding communities.
Led by Curt Stowers, F5FP focuses on providing corporate executives, entrepreneurs, and families with comprehensive financial planning that leads to financial security, simplicity, and success. As an executive with Caterpillar for 18 years, Curt brings real, practical experience to financial planning. Curt has successfully passed the examination to be awarded the CERTIFIED FINANCIAL PLANNER™ credential.[/author_info] [/author]