As we rapidly approach the beginning of a new year, most of us will take a few moments to reflect on our goals and aspirations for the future. Nearly universal on our checklist is the desire to make sure we’ve done everything in our power to protect our families. We want to make sure their needs are met in the present, as well as for the long-term. As families wrap presents and visit with friends and relatives this holiday season, estate planning may not be first and foremost on everyone’s mind. However, taking the time now to evaluate your estate plan is a practice in good stewardship and provides a more secure future for your loved ones. It also provides you with valuable peace of mind as you begin 2012.
While you have probably heard that everyone needs a will to direct the disposition of their assets, there are a few documents that are equally, if not more, important. The first of these documents is a “Declaration of Guardian for Minor Children.” As you can discern from its name, this document allows you to designate someone to care for your children should you and your spouse no longer be able, either due to death or disability. Many clients consider this to be the most important document in their entire estate plan, and we work with them to come to a God-pleasing decision that works for their family.
There are also several other documents that are important to consider for a complete estate plan. It is vital to note that while a will affects your assets and family after you pass, some documents also affect you and your quality of life while you are alive, and therefore merit special attention. The first is a “Statutory Durable Power of Attorney.” A power of attorney enables someone to act for you in the management of your financial matters (such as with a bank account or the sale of a home). One can define the scope of the powers given to their agent and when those powers take affect. As you may have experienced first hand with an aging relative, these documents are very important as we grow older and are unable to manage all of our own financial affairs.
Related to medical decision-making, there are two important documents that everyone should consider. The first is a “Medical Power of Attorney.” This document allows someone to make medical decisions on your behalf if you are unable to make them yourself. The second document is a known as a “Directive to Physicians” (also sometimes referred to as a Living will), which conveys your end of life medical treatment preferences to your doctors and family. As you can imagine, having these documents in place helps to ease the decision-making process and provides guidance to your loved-ones in what is certain to be a stressful and emotional time.
Finally, a will is an important component to all of our estate plans. First, a will allows you to name fiduciaries, such as an executor to carry out the directions in your will and settle your estate and a trustee to manage any trusts you may create in your will on a more long-term basis. Second, a will allows you to direct how you want your assets distributed upon your passing. Through the creation of a will, you have the opportunity to provide for your family, as well as to make provision for any charitable or religious causes that are near and dear to your heart. Through simple planning, it is possible to avoid unnecessary tax burdens and protect your family from having their inheritance plundered by future creditors. Additionally, with the proper planning in your will, you can provide for individuals in your family that may have special needs without endangering their qualification for government benefits.
Something many people are not aware of is how the disposition of certain types of assets will not be controlled by their wills. There are many different important types of assets that are considered “non-probate assets,” and that pass to your named beneficiaries based on contractual designations instead of under the terms of your will. For example, a life insurance policy you own on your own life will generally not pass according to the terms of your will. Instead, the proceeds from the policy will pass to the beneficiaries you designated with the life insurance company. The same applies to many retirement accounts, as well. Because for many of us these types of “non-probate assets” comprise the bulk of our estates, it is important to assess them frequently and determine whether the beneficiary designations made with the individual companies coordinate with the rest of your estate planning objectives.
These are but a few of the numerous important items you should consider as you contemplate your estate planning goals for the new year. From the need for sophisticated tax planning to business succession planning, everyone has a unique set of issues and concerns when determining the best path for their family. This is why it is important to start evaluating your goals and objectives now, so that you may usher in the new year with the peace of mind that comes from knowing that your family is protected, no matter what the future holds.
Tracey L. Reyes is an attorney at Hayes & Wilson, PLLC, a law firm whose practice is primarily focused on estate planning, probate, and guardianship matters. For more information, visit www.hayeswilsonlaw.com or call (713) 880-3939.
