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Estate Planning: Building a Strong Foundation

Estate planning is often an uncomfortable and emotionally charged topic to contemplate as it requires answering questions concerning our ability to make decisions as we age or become incapacitated and what the world will be like for our family after our death. It includes reviewing legal options, tax implications, investment strategies, and answering personal questions to ensure your desired outcomes are met in the most effective and efficient way for your particular situation. 

The documents we recommend clients have in place as a foundation for their estate plan are a:

  1. Will
  2. Letter of Intent
  3. Beneficiary Designations
  4. Financial Power of Attorney
  5. Medical Power of Attorney
  6. Living Will

Will

When you think about estate planning, the first document that often comes to mind is your will. A will spells out your wishes regarding the distribution of your assets and care of any dependents.  When no will is in place, the court will determine who will receive the assets and the distribution may be delayed.  In your will, an executor/executrix is named and this person will be responsible for carrying out your desires on the distribution of your assets (savings and checking accounts, houses, cars, etc.)

Letter of Intent

A letter of intent might cover other details that aren’t included in a will, such as funeral arrangements or a decision for a specific asset, like naming who should inherit a particular family heirloom. Unlike a will, most letters of intent aren’t legal documents, but they provide supplemental information for your estate. The more information you can provide for your heirs the better. A letter of intent can help supplement gaps in a will and answer questions your beneficiaries or probate court might have.

Beneficiary Designations

Some assets within your financial life are not passed on to your intended heirs through your will but rather by naming a beneficiary.  Retirement accounts (IRAs, 401(k), and 403(b)) and life insurance are some examples of assets which pass by beneficiary designation and not through your will.  For each account, naming a primary beneficiary(ies) and a contingent beneficiary(ies) is recommended.  An annual review of your beneficiaries is important as things can change (e.g. marriage or divorce, kids and grandkids, new in-laws, etc.) and having an outdated beneficiary plan can be a recipe for disaster. 

If no beneficiary is stated, your decisions may end up in the hands of the court, which can be an impersonal way to handle your assets because a judge has no familiarity with your wishes. 

Financial Power of Attorney

Your Financial Power of Attorney allows a person to act on your behalf and oversee your assets if you are unable to do so while you are still alive.  This person would be responsible for managing your day-to-day financial needs – including paying your bills and potentially other decisions depending on the powers granted in the document.

You don’t have to name a family member. You may choose a trusted friend or professional to act as the Financial Power of Attorney, especially if they have a strong financial background.

Medical Power of Attorney and Living Will

Your Medical Power of Attorney is a person who can make medical decisions for you if you are incapacitated. If you were admitted to the hospital and could not consent to treatment, this person would have the ability to make decisions on your behalf. This person can speak to your medical professional and have access to your medical information.

In addition to the Medical Power of Attorney, many people will also complete a Living Will. If you are unable to communicate, a Living Will helps doctors and family members make decisions about your care based on what you would prefer (e.g. mechanical ventilation, tube feeding).

Ideally, the person selected for this role understands, respects, and will honor, your wishes surrounding medical care.  

The Will, Letter of Intent, Beneficiary Designations, Financial Power of Attorney, Medical Power of Attorney, and Living Will are some of the important documents to consider when designing your estate plan. We recommend clients work with an attorney who focuses on estate planning as this is an area of specialization within the legal field. These attorneys create a plan which meets your desires for your assets and health in the event of incapacitation or death. We work with our clients to review the decisions they will make prior to meeting with an estate planning attorney and often attend the initial meeting with the client and their attorney to support communication and peace of mind.


This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.