2018 Wrap Up: Part 2

Last week we discussed the tax benefits of evaluating your investment portfolio before 12/31 rolls around.  This week we’ll have a look at another critically important topic, your Estate Plan.

If you are like many people, the idea of writing a will, a power of attorney, or a living will has crossed your mind more than once, but you still haven’t done anything about it.  If that is the case, you have plenty of company.  According to Caring.com, only 4 in 10 adult Americans have a Will.  Having plenty of company, however, won’t help your family sort out the mess you will no doubt leave behind if you die or become disabled without carefully writing and executing the proper documents.  I’m here to tell you that even when Mom & Dad do a thoughtful, thorough job of planning their estate it is still difficult at best on the kids.  Now, this may sound harsh, but it’s true…not getting around to this important task because you don’t want to think about your own death or disability is just plain selfish and irresponsible, and it leaves an unmitigated disaster for your children.  I have seen too many families torn apart, and siblings become uncivil to one another, because Mom & Dad, even if they got around to dealing with this topic, didn’t carefully think through the repercussions of their decisions.  I’ll give you an example, and then discuss the basic documents you will need to put in place.

Mom & Dad, who have three children, own a family business in which the eldest daughter is an active participant.  This daughter aspires to take over and grow the business when Mom & Dad retire (or die early).  Wanting to be “fair”, Mom & Dad decide to leave everything they own to each of their children in equal shares.  That means the daughter running the family business is now a minority owner of that business.  Her siblings want nothing to do with the business…except to extract maximum value from it.  Do you see a problem here?

Here's a refresher on the types of documents each person should have (feel free to share this with your family)...

Durable Power of Attorney:  A power of attorney is a document that authorizes another person, known as the agent or attorney-in-fact -- usually a legally competent relative or close friend over 18 years old -- to handle any combination of financial and legal decisions.  Think of a responsible, reliable person someone who can handle your bills, manage your money, and get good advice when needed.

Advance Directives: There are two types of advance directives...

A living will is a directive for the types of treatments you want or do not want, should you become permanently incapacitated. Think feeding tubes, assisted breathing, and pain management.

A health-care proxy is a legal document with which a person appoints an agent to legally make health care decisions on the person’s behalf when the person is incapable of making such decisions for him/her self.

Will or Living Trust: A simple will outlines the division of assets upon your death, and how your estate should cover any applicable taxes. It also names the person responsible for your dependent children (really important), as well as an executor to carry out all the requests. A living trust is more complicated but involves things like transfers of property and avoids the legal entanglements of probate court.

Now, do you need a lawyer to draw up all these documents? Not necessarily. There are services available online if decide you want to try doing it yourself.  Keep in mind, however, the majority of states won't necessarily accept a will you write yourself. You'll need to follow your state’s guidelines and be sure to have it properly executed when you are done. 

There are a number of websites you can visit to learn more. You can find Will requirements on LegalZoom's website here. The site also offers more on Powers of Attorney here. The American Bar Association has links for each state's advance directive forms right here.

Alternatively, you may choose to visit a lawyer to get all of these documents done.  This may be particularly prudent if you desire professional guidance on the best way(s) to accomplish your legacy goals or if your family situation is complicated.

Whatever you choose to do, DO SOMETHING, and do it soon.  Make an appointment with yourself, or a Trust & Estate Attorney, and take care if this critically important component of excellent financial planning.

Ken Armstrong, CEO

Elevate Capital Advisors

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