During the review and analysis process when becoming a client of Ciccarelli Advisory Services we ask many questions. One of the primary elements of financial and estate planning is for your advisor to know what happens if you become ill, incapacitated, or pass away, so it is important to have your legal documents and beneficiary designations in order. You may have these areas covered, but do your adult children have them covered as well? We find many younger people never think about having a will, an advanced medical directive, or a durable power of attorney. The following is a list of basic documents you may want to discuss with your children, especially if there are grandchildren or second marriages involved.
- A will is the cornerstone of an estate plan. Its main purpose is to disburse property to heirs after death. If you don’t leave a will, disbursements will be made according to state law, which may be contrary to your wishes. Under a will, you name an executor who will manage and settle your estate. If you do not name one, the court appoints one for you. You can also name a guardian for minor children or dependents with special needs. Again, a position you might not want the state to choose for you. Keep in mind, a will is a legal document and courts are reluctant to overturn the provisions, so it is important that it is well written and articulated according to the state laws where you reside. It also needs to be updated when specific events happen such as a death or birth in the family, a marriage or divorce, or when state laws change.
- A durable power of attorney helps protect your property in event you become physically or mentally incompetent to handle financial matters. A DPOA allows you to authorized someone to act on your behalf, such as paying your everyday expenses, collecting benefits, watching over investments or filing taxes. A DPOA ceases the day you die.
- Advanced medical directives inform others what medical treatments you would want, and it allows the person you choose to make medical decisions for you if you cannot. Each state may have different rules. Examples of advanced directives are a Living Will, which allows you to approve or decline certain types of medical care; a Durable Power of Attorney for Health Care (known in some states as a health care proxy or surrogate), which allows you to appoint a representative to make health care decisions for you; and a Do Not Resuscitate order, which directs medical personnel not to take extreme measures to prolong your life.
- A Living Trust (also known as a revocable or inter vivos trust) is a separate legal entity created to own property such as investments and real estate. The trust is called a living trust because it functions while you are alive. You control the property in the trust but, upon your death, the trust documents pass your assets that are titled to the trust to your beneficiaries, avoiding probate. Not everyone needs a Living Trust. This is a discussion item for your financial advisor and your attorney.
If you are spending the holidays with your family, it might be a good time to discuss these documents. It may not be the most comfortable topic over a holiday dinner, but if you are unsure if your children have taken care of these important matters, start a conversation to assure they are covered and your grandchildren are protected. Consider gifting your children a consultation to have a review and analysis of their financial situation with our firm. You may also wish to gift the legal cost of having an attorney complete the estate planning documents. Both are thoughtful places to begin.