Estate Planning: Fortifying Your Legacy

For many people, estate planning can be a stressful – even grim – topic as it stirs thoughts of mortality and creates anxiety about the well-being of our future generations. We believe it should be viewed differently – as a means of empowerment to allow you to protect your family and take control of the appropriate management of your assets (and healthcare) upon your incapacitation or death. As the estate planning process can be complex, it is essential to collaborate with an estate attorney, tax professional, and financial advisor to create a plan that is right for you and your family.

An updated estate plan is essential to protect your family and beneficiaries. It is important to review your estate plan at least every five years – or sooner if estate tax laws change or you have a major life change such as a birth, marriage, divorce, or death of a family member. In addition, make sure you have named your beneficiaries and that your beneficiary designations are up to date (Learn more about Account Designations). Also be sure to check in with any POA’s to confirm that they are willing and able to act in those roles.

Wills and Trusts: What’s the Difference?

In a will, you name an executor who will have the power and responsibility to distribute your assets according to your wishes, as well as settle your debts. You can also name a guardian for your children under the age of 18. Wills go into effect when you pass away. They are also subject to probate – an expensive process that makes your estate part of the public record. If you die without a will, your property will pass to your survivors based on your state’s laws of intestacy, which may not align with your desired goals.

A trust holds assets on behalf of beneficiaries, with a trustee authorized to distribute the assets in the trust as stated in the trust document. It becomes active once it is signed and funded – typically providing distribution and management of assets during life and after death. It can serve many purposes, including tax planning, medical planning, and charitable giving. Creating a trust can help your heirs avoid probate, the process by which a court decides that a will is valid. As the probate process can be costly and time-consuming, beneficiaries may gain access to assets more quickly than those that are transferred using a will. With a trust, fewer taxes may be due when a person passes.

Beneficiaries may gain access to assets more quickly in a trust than those that are transferred using a will.

What about Power of Attorney (POAs)?

A Power of Attorney (POA) is a legal document that gives the authority to your chosen agent in legal or financial matters (ranging from specific to general). Your agent can only do what is outlined in the POA document and within state laws. Different types of POAs can also give different powers, so it is important to match the type of POA with what needs arise. Here are some examples:

General: Gives broad rights your designated agent to manage your affairs. It can also be revoked at any time. This type of POA is often used when a person can still take care of their affairs but would prefer someone else manage these tasks. These POAs end at incapacitation.

Durable: Like a General POA but lasts after incapacitation. This type of POA would be used when you are unable to manage your affairs on your own. You can revoke the POA if you are no longer incapacitated. It can be revoked upon your death or if a guardian is appointed.

Limited or Non-Durable: Limits the decisions that can be made to specific tasks. It can be used to authorize the payment of bills or to sell a home, and your agent can only act by what is specified in the document. These POAs are usually temporary and will be revoked if you become incapacitated.

Springing: Allows you to stay in control while you are able, but it is ready to spring into action once you are not, based on a medical determination made by a doctor.

Medical or Healthcare: Like a Durable POA, allows you to authorize a trusted individual to make decisions about your medical care if you become incapacitated. In the case of a medical POA, your agent can make all health care decisions for you.  

Having a Living Will or Advance Healthcare directive does not drop the need for a Medical POA. Situations may arise that require decisions to be made by your Medical POA.

What are Living Wills and Advance Directives for Medical Decisions?

Living wills and advance healthcare directives are legal documents that specify your preferences for medical care if you are unable to make decisions for yourself. The living will or advance healthcare directive can ensure that you get the medical care or procedures you would (or would not) want. It can relieve the pressure of making difficult decisions by your family in a time of crisis and minimize confusion or disagreement about what you would choose if you were able.

A Medical POA is NOT a living will. It only covers medical procedures you do or do not consent to.

As estate planning can be complex, always work with an estate attorney, tax professional, and financial advisor to put all the pieces in place. As always, please feel free to reach out with any questions.

The estate planning information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal advice. Youngs Advisory Group does not provide legal advice. Youngs Advisory Group cannot guarantee that such information is accurate, complete, or timely. Laws of a particular state or laws that may be applicable to a particular situation may have an impact on the applicability, accuracy, or completeness of such information. Federal and state laws and regulations are complex and are subject to change. Always consult an attorney regarding your specific legal situation.