Helping Your Family Help YouBy Barbara S. Anderson and Natalie T. Page
Be prepared in a crisis. You hear this all the time. For instance, when a hurricane is on its way, media urge you to assemble a survival kit of flashlights, batteries and water. Before a long road trip, it’s advised you have an emergency road kit.
You don’t want to wait until you’re in the midst of a crisis to get prepared. The same is true for creating a comprehensive estate plan. Often, it is not until someone has passed or has become unable to handle their own affairs that their family discovers that the tools to deal with the situation are not in place.
A comprehensive estate plan will make it much easier for your family to take care of your finances during your lifetime, if necessary, and after your death. Such a plan has three parts: legal documents; a financial plan; and organized documentation. Establishing a plan now will help your family step into your financial shoes with minimal delay during a time of crisis.
Estate Plan Part 1: Legal Documents
The following basic legal documents are essential: Last Will and Testament (“Will”), Advance Medical Directive and General Durable Power of Attorney (“Power of Attorney”). A somewhat more sophisticated plan will also include a Revocable Living Trust (“Trust”).
The Advance Medical Directive and Power of Attorney together give your named agents the power to make and carry out medical and financial decisions when you cannot do so yourself. They are only effective during your lifetime.
Conversely, your Will has no effect until after your death. In your Will, you name your chosen beneficiaries and appoint an executor to manage your estate. A Trust is a bit of a hybrid; allowing the person you choose to handle your finances both during your lifetime and after your death smoothly and without court oversight.
Despite the essential nature of these documents, a new Caring.com survey found that half of Americans are not prepared. Only 42 percent of U.S. adults currently have a Will or Living Trust. For those with children under the age of 18, the figure is even lower, with just 36 percent having an end-of-life plan in place.
The Power of Attorney, Will and particularly the Trust help streamline the process of managing your financial affairs. This is important because if you become incapacitated and do not have a Power of Attorney, someone will have to ask the Court to appoint a Conservator to deal with any assets not held by a Trust and to deal with things such as your credit cards, taxes and qualified retirement accounts. This may or may not be the person you would prefer in this role.
If you pass away without a Will, your assets will pass according to state law, regardless of your preferences. Additionally, the person appointed by the Court to handle your estate may not be the person you would choose. Indeed, if none of your heirs-at-law come forward within 60 days of your death, a creditor or any other person who applies could be appointed to administer your estate. These documents give your chosen agents the tools they need to carry out your expressed wishes and help avoid confusion and conflict during times of crisis.
Estate Plan Part 2: Financial Plan
The second part of a good estate plan is a good financial plan. It is important to do the hard work of planning for your financial future now so that your family does not have to engage in crisis management later. A good financial planner can help lay out how your assets would be used in several different situations, including giving you options for both the best and worst scenarios. This is particularly important if you, your spouse or both of you become incapacitated.
Working with a financial planner shouldn’t be a one-time thing; keeping your plan up to date will help your family to understand quickly your financial situation, your wishes and the realities of what decisions will and will not work for you.
Estate Plan Part 3: Organized Documentation
Finally, none of the legal or financial planning will be of any help to your family if you don’t keep the necessary information organized and let the appropriate people know how to access it. You don’t need to share all of this information right away, but your chosen agents, trustee and executor will need access to all your financial and identifying information when the time comes, including:
- estate planning documents;
- financial planning documents;
- documentation regarding day to day and ongoing expenses;
- contact names and numbers for legal and financial advisors, health care providers and anyone else you deal with on a regular basis;
- all documentation relating to income, including retirement accounts, pensions and Social Security;
- list of online accounts and any digital assets along with a list of passwords;
- a copy of Medicare and Social Security cards;
- insurance information, including medical, home and car insurance;
- military discharge certificate (DD-214);
- birth certificate;
- marriage certificate and spouse’s death certificate if applicable;
- car titles;
- any other information that you need or use to manage your affairs.
Putting together a comprehensive estate plan that will make it easier for your family to manage your finances during your lifetime and handle your estate after your death does require work and organization. Doing the work now will make it much easier for your family during a time of crisis.
Managing someone else’s affairs is a tough job, so it is critical that you provide your family the tools to do that job well and efficiently. Your family will thank you!
Barbara S. Anderson and Natalie T. Page are Elder Law attorneys of the Life & Estate Planning Law Center, PLLC in Alexandria, Virginia. You can learn more about estate planning, estates, trusts, and Elder Law at www.LifeandEstatePlanningLaw.com. This article is intended only to provide general information, not formal legal advice and does not establish an attorney-client relationship. If you have questions, please contact us through the website or by telephone at (703) 820-3600.