Your Go-To Guide to Estate Planning
This article was recently published by Forbes.com about the importance of estate planning:
As many of us watch our portfolios dwindle and bills add up, it’s tempting to put off planning for the future. Experts caution, though, that everyone–no matter their age or family status–needs to sit down and plan their estate.
Whether you are wealthy or debt-laden, you should tell loved ones and put into writing how you want your estate to be handled, says Debbie Whitlock, co-owner of Sound Financial Partners, a financial-services practice in Seattle.
She says women often assume that such after-death planning is something only rich people need to do. Perhaps it’s the word “estate.” That’s wrong.
“It doesn’t matter how much money is in your bank account” or what age you are, says Whitlock, who works mostly with female clients. “Everyone needs to do estate planning. Without it there’s a lot of confusion and chaos.”
Estate planning isn’t just about distributing cash. If you don’t have a will, your children could end up guardians of the state. Heirs could end up liable for your debts. Loved ones will be saddled with your funeral costs with no hope of reimbursement until after a lengthy court process that can take years.
The process is also a part of long-term financial planning: You are forced to figure out what your life goals and needs are. Do you dream of leaving the ASPCA a trust? Do you want to make sure your niece’s college is paid for? If your partner dies, will you be able to stay in the house you share?
“Documents [like wills] give you peace of mind that everything you worked for will go to a charity or the individuals you intend,” says Terri Kallsen, senior vice president of USAA Wealth Management.
It goes beyond money. If you are injured or terminally ill, your family and partner could end up fighting over how to handle your medical care. There are two vital documents for handling this: the living will and the health care power of attorney. Once again, you must communicate clearly about your wishes.
The living will spells out how you want the end of your life to be handled. For example, if you have a serious accident or massive stroke and cannot communicate, a living will might note whether you want a “do not resuscitate” order on your hospital records or whether you want every medical option exhausted before letting you go.
A health care power of attorney is also a good way to prevent conflict among your loved ones. In this document, you designate someone who’s authorized to make medical decisions on your behalf, such as whether to pursue more treatment after you’ve had a heart attack. Although emotionally distraught family members who don’t have a POA can still try to step in, having the document allows an attorney to intervene and defend your designated representative’s decisions.
But wait–you’re not done yet. If you are married or living with someone, experts say you must discuss both of your wills together. A serious potential complication concerns housing. If you are living with or married to someone who owns your home and there are no arrangements to let you stay there after your partner’s death, you could be evicted.
This is especially common between older couples, who may have been married before and have children of their own. If the partner’s will doesn’t spell out arrangements for you, his own children could end up inheriting the home and would then have the authority to sell it.
On the other hand, if you’re in a marriage that is ending, make sure your spouse’s name is removed from any financial document where it appears–bank accounts, your 401(k), insurance, credit cards. If you think you’re protected because you’ve spelled out other heirs in a will, you’re out of luck. “These trump a will,” says Michael Gierer, an attorney in the Bronx.
If you’re older and have more money, “you need to be more careful and clear about your goals and beneficiaries,” acknowledges Kallsen. “You have to be clear about where you want your money to go.”
It’s OK to admit it: No one wants to think about the inevitable. It’s scary and strange, especially if you haven’t reached middle age. Take the matter into your own hands–for yourself and those who love you.