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by Gina Gallovich
January 24, 2020
by Gina Gallovich
January 24, 2020
When addressing financial literacy, there are so many elements to consider. One fundamental factor that most tend to forget is legal in nature and urges one to answer the question: What happens when I die?
You've seen headlines about the many lives that have been cut short due to freak accidents, unexpected health issues and the like. In addition to the natural heartbreak experienced, there are inevitable consequences for the family members and friends left behind if one does not handle their financial and legal affairs timely and appropriately.
Often times, loved ones are left unsure of what medical care to provide should an individual be hospitalized, or the overall final wishes of the recently deceased. No matter an individual's age, the time to start planning is now.
You can eliminate some of their grief by addressing your preferences today, should something happen to you tomorrow. In following a few simple steps, you can plan for the unexpected, which will ensure that your wants and desires are carried out and that your assets are protected, whether large or small.
How to get started, you ask? Simply meet with an attorney, preferably one with estate planning experience so that you can have the proper documents drawn up. At a minimum, consider a trust, will, power of attorney or an advanced care directive (living will). It is advisable to have your affairs organized before meeting with an attorney to keep your expenses down because attorneys charge by the hour.
Why these specific documents and what is the protection they provide, you wonder? Let's go through them one by one:
Trusts and wills basically do the same thing - secure your assets and ensure that your last wishes are followed. But which is right for you?
According to Jehan Crump-Gibson, co-founder and managing partner of Great Lakes Legal Group, "Not one size fits all. An estate planning attorney will work with you to decide which option will work best, with the ultimate goal of avoiding probate court."
Your attorney will help you determine the best option. For instance, if you do not own property but have various financial accounts, insurance and personal property, a will may be the right choice for you. Alternatively, if you own property in multiple states or in your name alone...or have someone with special needs that you wish to care for, a trust may be the best option.
Your attorney will also help ensure that you have an accurate account of all assets; that you have determined who you wish to bequeath money or property to; which, if any, charitable contributions you want to make; and how to best mitigate your estate taxes.
Should you die without either, then it can lead to a long, drawn out battle in probate court.
"Your best option," says Crump-Gibson, "is to avoid probate court at all costs as it can be tedious, costly and open to the public."
Once your trust or will has been signed, witnessed and notarized, plan to meet with your attorney on a yearly basis.
"Follow-up with your attorney is important, as nothing ever remains stagnant," said Crump-Gibson. "You may buy or sell real estate, open new accounts, have additions to the family - all of which should be included in your plans."
Simply put, a power of attorney is a legal document where you, the principal, give someone the power to act on your behalf, generally for financial decisions. A general power of attorney is broad in nature and generally gives your designated individual the power to make all financial decisions and give advice while you are alive. A general power of attorney ends when the principal dies.
A limited power of attorney is less broad in nature and the rules of engagement are spelled out. You could use a limited power of attorney to allow someone to represent you in a real estate transaction, to pick up your mail or to buy and sell stocks, for instance. As the principal, you can specify a time limit for this document.
As with powers of attorney, there are numerous versions of advanced care directives. The oldest one is a living will. It is a legal document that allows you to specifically state your wishes regarding your health care at the end of your life. Often, people opt for the administration of "palliative" care (to be made comfortable) while avoiding "extraordinary" measures such as CPR or ventilators.
A durable power of attorney for health care, unlike many living wills, does not require that your condition be terminal in order to be enforced. Also, you will designate an individual to make health care decisions on your behalf. It is very important to have honest and upfront discussions with your designated agent.
Let your executor or another trusted person know where all your important documents are. Consider renting a safety deposit box so that they will all be in one place or leave them in the hands of your attorney.
Many of us handle our business electronically, whether it's banking, investments, loans and more. It's important to keep a secure listing of all accounts with the names of the institutions and updated passwords. Should anything happen to you, this will help your executor better handle your estate.
Though it may be a lot for you to address, the time and effort you spend to get your affairs in order now will eliminate heartaches for you and/or your loved ones later down the road - hopefully a very long way down the road. Nevertheless, you can demonstrate your literacy by ensuring that your loved ones have your directives, in advance, to prevent any hiccups.