While no one likes to think about death or disability, preparing your estate plan is one of the most important safeguards you can create to protect yourself and your family. Careful estate planning not only puts you in charge of your financial future, it can also spare your loved ones the emotional anguish, expense, and red tape associated with managing your affairs if you become disabled or pass away.
Planning for Incapacity
If you should become incapacitated, you may not be able to manage your own financial affairs. It is a common misconception that your spouse or adult children will automatically be able to take over for you if you become incapacitated. The truth is that in order for some one else to be able to manage your finances, they must petition a court to declare you legally incompetent. This can be long, costly and stressful process. Even if the court happens to appoint the person you would have chosen, it will continue to supervise that person’s management of your affairs. If you want your loved ones to be able to manage your finances without delay, you must designate a person(s) that you trust in the appropriate legal documents. This cannot be done through a will, because it does not take effect until you pass away. A power of attorney may be insufficient.
You should establish a plan for your medical care. A medical power of attorney allows you to appoint someone you trust to make decisions for you about medical care if you lose the ability to decide for yourself. In addition to a medical power of attorney, you should also have a living will which informs others of your preferences if you should become permanently unconscious or terminally ill.
If you leave your estate to your loved ones using a will, everything you own will pass through probate. The process is expensive, time-consuming and open to the public. The probate court is in control of the process until the estate has been settled and distributed. If you are married and have children, you want to make certain that your surviving family has immediate access to cash to pay for living expenses while your estate is being settled. It is not unusual for the probate courts to freeze assets for weeks or even months while trying to determine the proper disposition of the estate. Your surviving spouse may be forced to apply to the probate court for needed cash to pay current living expenses. You can imagine how stressful this process can be. With proper planning, your assets can pass on to your loved ones without undergoing probate, in a manner that is quick, inexpensive and private.
Providing for Minor Children
If you have children under the age of 18, it is important that your estate plan address issues regarding their upbringing. You should consider the possibility that both you and your spouse may pass away simultaneously, or within a short duration of time. Your plan should identify the persons you’d like to manage your assets, as well as the guardian you’d like to nominate for the upbringing of your children. Otherwise, the decision as to who will manage your finances and raise your children will be left to a court of law.
You should give careful thought to your choice of guardian, ensuring that he or she shares the values you want instilled in your children. You will also want to give consideration to the age and financial condition of a potential guardian. Some guardians may lack child-rearing skills you feel are necessary. Make sure that your plan does not create an additional financial burden for the guardian.
Other issues to consider in this respect is whether you’d like your beneficiaries to receive your assets directly, or whether you’d prefer to have the assets placed in trust and distributed based a number of factors which you designate, such as age, need and even incentives based on behavior and education. All too often, children receive substantial assets before they are mature enough to handle them properly, with devastating results.