Estate planning is the process used to arrange for the transfer of your property to your
heirs and to other beneficiaries, in a way that will achieve your personal objectives and
minimize the associated costs and taxes. Like the other areas of financial planning, estate
planning is individualized and goal-oriented.
On the financial side, a good estate plan coordinates what will happen with your home,
your investments, your business, your life insurance, your employee benefits (such as a pension plan)
and other property in the event you became disabled or die.
Wills
In addition to insurance, a will is a necessary part of good financial management.
If you do not have a will, a state court finalizes your affairs upon your death and
charges your estate for the expenses. Your remaining assets are divided among your
relatives according to state law. If you are unmarried and have no blood relatives,
the state may take your property.
With a will:
- You can designate who receives your property when you die.
- You can appoint a guardian for your minor children.
- You can provide financial security for your spouse and children.
- You can leave money to a worthy cause.
You should consider updating your will at regular intervals and whenever a significant
life event occurs, such as marriage, the birth or adoption of a child or moving
to another state.
Powers Of Attorney
- You can give another individual the legal authority to act on your behalf
for a purpose you designate, such as paying your bills, managing your personal
affairs or handling your finances.
- You must be of sound mind and not under mental duress to prepare and
execute any of these documents.
- Unless it is a durable power of attorney, a general power of attorney
expires if you become incapacitated.
- You have several options for authorizing another individual to act on your behalf.
Durable Power Of Attorney For Financial Transactions
- This document continues to operate even if you become unable to manage your own
personal and financial affairs.
- As long as you are mentally competent, you can revoke a durable
power of attorney whenever you wish.
- Consider executing a new durable power of attorney every 3 to 5
years to confirm your intention.
- Take your durable power of attorney to your financial institutions
while you remain competent to confirm they will accept it.
On the personal health side, a good estate plan includes directions to carry out your wishes
regarding health care matters, so that if you ever are unable to give the directions yourself,
someone you select would do that for you.
Durable Health Care Power Of Attorney Or Health Care Proxy
- Allows you to appoint someone to make health care decisions
on your behalf should you become incapacitated.
- Have it prepared by an attorney who specializes in the field
to ensure it conforms to your state’s laws.
Health Care Directive, Living Will Or Directive To Physicians
- Designates medical procedures you want taken if you become too ill
to state your preferences.
- You can specify types of treatment you would reject or accept, such
as no cardiac resuscitation, but maximum pain relief.
- You determine when your instructions apply, such as when your
diagnosis is a terminal condition.
- Consult with your physician to determine your options.
- Leave a copy of your living will with your physician.
- Review your options periodically. Revise your health care directive
to reflect changes in your preferences. New medical discoveries could
alter your decisions.
Health Insurance
Without health insurance, just one trip to the emergency room could put serious financial strain
on your family or deplete your savings. It is one of the most important ways you can financially
protect yourself and your family. Without health insurance you could incur significant
debts as a result of medical treatment. Without health insurance you are less likely to seek
preventive care or timely diagnosis of an illness.
If your employer offers subsidized
group health insurance coverage as one of its benefits, taking that coverage is usually a better
choice financially than buying a private medical insurance policy. If private health insurance
is your only choice, you will need to include it in your budget.
Disability Insurance
If a severe injury or illness prevents you from working, disability insurance
can help you keep sufficient income coming into the household. The policy replaces
a portion of your income after certain requirements are met. You may be able to
get some disability coverage through your benefits plan at work that will typically
cover as much as 60 percent of your gross income. Premiums vary depending on
the type of plan you choose and payments to you may be subject to federal income tax.
Life Insurance
When you are single and have no dependents, life insurance may not be a necessity,
unless you have significant debt. When you marry and someone depends on you and your
income, life insurance is an important consideration. Life insurance is designed to
cover debts and replace the income lost to your beneficiaries when you die. Talk to
a financial planning professional about what kind of life insurance policy is best
for you.
Long-Term Care Insurance
A long-term care insurance policy can help safeguard your savings from the high cost
of long-term care services such as home health care, rehabilitation or nursing home
care. If you are in your 20s or 30s, you should regard long-term care insurance as a
future expenditure. As you move into your 40s and 50s, purchasing the coverage may be
a consideration. Research the options that long-term care insurance offers and review
specific policies available to find the one best suited to your needs.
In summary, the intended purposes of estate planning are to establish the legal disposition
of your financial assets, to minimize potential taxes and fees and to set up contingency plans
for making sure your wishes regarding health care treatment are followed.
Financial planning professionals recommend you use an attorney with estate planning knowledge
and experience to prepare the legal documents required for your specific needs. Legal expenses for
estate planning vary. Remember to review and update your will and estate plan periodically, especially
if your family circumstances change because of significant events such as a birth, adoption, divorce or death.
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Basic Money Management
Basic Money Management
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