Being Prepared for an Unpredictable Life
The coronavirus pandemic is another reminder that life is unpredictable, and it makes sense to be prepared. It may sound self-serving, but the threats to life and finances posed by the pandemic offer ample reason to reevaluate your estate plan - or create one if you haven't already.
Experts recommend that you will need to revisit your plan after certain key life events (covered in "Why Everyone Over 60 Should Update Their Estate Plan") , including changes in health, finances, or family status. Unfortunately, this global health crisis can affect all of those aspects of your life.
Five Essential Estate Planning Documents
Especially in light of the coronavirus, but also as a general practice to leave a legacy, not a predicament, you should make sure you have these essential estate planning documents in place to protect yourself and your family:
1) Health Care Powers of Attorney and Living Will.
A power of attorney for health care designate someone you choose to make health care decisions for you if you are unable to do so yourself. A living will instructs your health care provider to withdraw life support if you are terminally ill or in a vegetative state.
2) Financial Power of Attorney.
A financial power of attorney allows a person you appoint -- your "attorney-in-fact" -- to act in your place for financial purposes when and if you ever become incapacitated. In that case, the person you choose will be able to step in and take care of your financial affairs. Without a durable power of attorney, no one can represent you unless a court appoints a conservator or guardian. That court process takes time, costs money, and the judge may not choose the person you would prefer. In addition, under a guardianship or conservatorship, your representative may have to seek court permission to take planning steps that she could implement immediately under a simple durable power of attorney.
Covered in previous post: "Understanding the Different Types of Power of Attorney in Ohio: 4 Main Types of POA"
A will is a legally-binding statement directing who will receive your property at your death. If you do not have a will, the state will determine how your property is distributed. A will also appoints a legal representative (called an executor or a personal representative) to carry out your wishes. A will is especially important if you have minor children because it allows you to name a guardian for the children. However, a will covers only probate property. Many types of property or forms of ownership pass outside of probate. Jointly-owned property, property in trust, life insurance proceeds and property with a named beneficiary, such as IRAs or 401(k) plans, all pass outside of probate and aren't covered under a will.
A trust is a legal arrangement through which one person (or an institution, such as a bank or law firm), called a "trustee," holds legal title to property for another person, called a "beneficiary." Most trusts name the trust creators as beneficiaries during their lifetimes and another set -- often their children – a beneficiaries after their death. There are several different reasons for setting up a trust. The most common reason is to avoid probate. If you establish a revocable living trust that terminates when you die, any property in the trust passes immediately to the beneficiaries. This can save time and money for the beneficiaries. Provided they are well-drafted, another advantage of trusts is their continuing effectiveness even if the donor dies or becomes incapacitated.
5) Beneficiary Designations.
Although not necessarily a part of your estate plan, at the same time you create an estate plan, you should make sure your retirement plan beneficiary designations are up to date. If you don't name a beneficiary, the distribution of benefits may be controlled by state or federal law or according to your particular retirement plan. Some plans automatically distribute money to a spouse or children. Although others may leave it to the retirement plan holder's estate, this could have negative tax consequences. The only way to control where the money goes is to name a beneficiary
Elder Law and Estate Planning Attorney in Avon Lake
At Joseph L. Motta Co., a local elder law and estate planning firm in Avon Lake, OH, it is our goal to help you leave a legacy, not a predicament. Let us help you look over your estate planning documents to see if they may need updating. Please call our office at 440-930-2826 to schedule a free consultation .