Avoiding estate taxes used to be the primary motivator to create and draft estate planning documents before you died. For most people, the government has never been their favorite charity.
The current estate tax exemption is now $5,450,000 for a single person or one spouse, and $10,900,000 for a married couple. The reality is that most of us will not die with an estate tax problem. Friend, the main reason you now want to get your estate plan created is to protect your most precious asset: your family. The following action items are the keys to having your estate in order so you can focus on Living Well rather than Preparing for Death.
Action Item 1: Review and update ALL beneficiary designation forms. A common misconception is that life insurance proceeds, retirement plans, IRA balances, and annuities will be transferred at death through your will. Unfortunately, that is not the case. The people listed on the beneficiary forms completed when these accounts were opened “trump” the beneficiary designations listed in your will. Please make sure the same person you listed in your will to receive your money is also who is listed on your beneficiary designations forms. This is especially a problem if you have been married more than once. You might be leaving a small fortune to your ex-wife or ex-husband without even knowing it.
Action Item 2: Each Spouse Must Execute their Own Will. A will designates how your property will be distributed at your death, according to your wishes, AND it appoints the Executor of your Estate. The Executor will be responsible for handling all legal and financial affairs after your death. The decision of who will handle your estate is not one to be taken lightly. They should be trustworthy, organized, and fairly well versed in how to manage financial affairs.
Action Item 3: Execute a Health Care Power of Attorney. This is a legal document authorizing the remaining spouse, or another party, to make necessary healthcare decisions in the event of an illness, accident, or incapacity to make decisions.
Action Item 4: Each Spouse Must Execute a Living Will. This document expands on the terms outlined in a Health Care Power of Attorney. In addition, it states whether or not you want your medical team to take heroic measures to keep you alive in the event that you are terminally ill, or in a persistent vegetative state, such as a coma.
Action Item 5: Execute a Financial Power of Attorney. This legal document authorizes the remaining spouse, or another party, to take care of financial matters in the event of your illness, accident, or incapacity.
If you are a business owner or have a very complicated estate plan, I highly recommend that you hire a Certified Estate Planning Attorney to draft your wills and other related estate planning documents. However, if you simply want to appoint a guardian to care for your children at your death and to ensure that your assets are distributed in a timely fashion, then I recommend creating your estate planning documents online.
My favorite website for preparing very simple wills and powers of attorney is: www.legaldocs.com. For a very nominal fee, the website provides legal templates for your estate planning documents that you can customize to fit your needs. Simply print the legal forms yourself and take them to a local bank to be notarized. Finally, make sure your documents are in a safe place and at least one extended family member has a copy of your estate plan.
After your estate plan is in place, and you are certain that your family will be well cared for if something happens to you, put these conversations behind you. Go get busy living a life worth talking about! #FAITHFULFINANCE