Many of us could benefit from taking some time to update our estate plans. If you don’t have one in place, there’s no better time to put it together than now.
It never hurts to be prepared in the event that you or your spouse become incapacitated with illness or pass away suddenly. Thinking about falling ill or not being able to make decisions for yourself can be frightening, but having an estate plan in place can help ease your concerns.
Estate Plan Documents to Review & Update
Individuals over the age of 18 should have some level of estate planning in place. You may be surprised to learn that wills and trusts aren’t the only documents to prioritize. A strong estate plan will include several important documents, such as a living trust, financial powers of attorney, health care powers of attorney and more.1
In the event you fall ill, two of the most important documents to have up-to-date and on-hand are your medical and financial powers of attorney. For instance, if you’re homebound, admitted to the hospital or become incapacitated, you’ll need someone to handle your finances or make medical decisions on your behalf. With those in place, it’s a good idea to continue organizing a comprehensive estate plan that includes the following documents.
1. Power of Attorney and Health Care Proxy
A financial power of attorney grants authority to carry on a person’s financial affairs and protect their property by acting on their behalf. This includes the ability to write checks, pay bills, make deposits, purchase or sell assets or sign any tax returns.1
Similarly, a health care power of attorney grants the authority to make health care decisions on your behalf should you become incompetent or incapacitated. If you are over the age of 18 and do not have a health care power of attorney in place, your family members will need to request that the court appoint a guardian to take on these responsibilities.1
Ensuring that you have named trustworthy and reliable individuals as your powers of attorney is key as you update your estate plan. If your current documents are outdated, implementing new ones should be on the top of your list.
2. Your Will
A last will and testament is a legal document that allows you to direct distributions of your property at the time of your death. A will also allows you to appoint an executor who oversees the distribution of your assets.2 This person will attend to your affairs after you pass, probate your will if necessary and file income and estate tax returns on your behalf. If you have children who are minors, you should also name a guardian for them in the will.
Everyone has assets that must transfer after a person’s death, and without a will, there is no direction as to how and to whom those assets will pass. Distribution of your assets will be handled by the state and the court will decide on the best person to oversee the administration. This is similar to an appointed guardian in that if you don’t appoint one, a court will decide on the best person to fulfill this role.2
3. Living Trust
In general, your trust benefits you while you are alive and may also be beneficial to others, such as your spouse or children. Identifying who will receive assets upon your death may be a detail that needs updating based on your lifestyle and changes that have taken place. Additionally, you’ll want to outline whether your beneficiaries receive your assets outright or perhaps you’ll want to provide them with an income stream instead. If your beneficiaries are young, you may want to consider holding assets for them in a trust until they are old and responsible enough to handle finances themselves.
Appointing a trustee will identify who will step in to manage your affairs without the involvement of the court, avoiding extra time and money associated with probate.3 A trust also affords you privacy regarding the details of your estate since it eliminates the need for probate, which is a public process.
Another important update you should make to your estate plan is to review beneficiary designations on your life insurance policies, retirement accounts, etc.2 Keep in mind that if you have a joint asset such as a bank account, that will pass to the surviving joint owner. Be sure to name someone you trust to act in your best interest should the time come for them to be responsible for your assets.
If you are unable to meet with your attorney in person, there are template websites online that allow you to create documents from scratch. While some documents can be finalized virtually, wills need to be signed in front of witnesses, which means this step to finalizing your documents may need to be done in person.
While you have the time, you should start reviewing your estate plan and making any adjustments with the appropriate professionals as needed. Making necessary and important changes now will likely benefit you and your family in the future.
For more information on estate planning, feel free to contact our team, California Retirement Advisors, at cradvisors.com or call at 888-643-7472 to schedule an appointment with an advisor.
By Christian Cordoba
CERTIFIED FINANCIAL PLANNER™
Founder, California Retirement Advisors
Investment advisory services offered through Mutual Advisors, LLC DBA California Retirement Advisors, a SEC registered investment adviser. Securities offered through Mutual Securities, Inc., member FINRA/SIPC. Mutual Securities, Inc. and Mutual Advisors, LLC are affiliated companies. CA Insurance license #0B09076. This content is developed from sources believed to be providing accurate information and provided by California Retirement Advisors. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. California Retirement Advisors, nor any of its members, are tax accountants or legal attorneys and do not provide tax or legal advice. For tax or legal advice, you should consult your tax or legal professional.