When I was Director of Development at my son’s private school, I learned a lot about charitable giving, endowment funds and bequests. One of my roles was to solicit contributions to the school’s endowment fund. This fund was used for any need the school had including financial aid.
One parish family contacted me wanting to set up a special scholarship fund for a graduating eighth grader. I had to create all the documents necessary to follow the family’s specific wishes for their contribution.
Later, while taking the Estate Planning course as part of my CFP® studies, my earlier experiences came back to me. Estate planning is all about making sure your specific instructions regarding your finances and health care are carried out exactly as you want. This includes while you are alive, incapacitated or deceased.
A basic example of this is a Last Will and Testament. YOU ALL SHOULD HAVE A WILL. If you don’t your State of residence will determine to whom your property and investments will be passed on.
Other important documents I strongly suggest you have are:
- Durable Power of Attorney (POA) – appoints another person or persons to handle your financial matters if you become unable to do so while you are alive
- Power of Attorney (POA) for Healthcare – appoints another person or persons to make healthcare decisions if you become incapacitated
- Living Will – often completed through a hospital and defines level of care wanted. This is where the Do Not Resuscitate (DNR) instructions would be given. This is usually not necessary if you have the POA for healthcare
A Living Trust may also be something you want. Even if you have a Will, your estate will go through Probate. This is a legal process that goes through the courts and costs your estate money. It also makes all of your finances public knowledge. If you have a Living Trust (and title your assets under the Trust), your estate will bypass Probate and your estate may be able to settle much faster and without being scrutinized by the public. Often times, when an attorney draws up a Trust they will also include a Will and the POAs. (Yes, you still need to have a Will even if you have a Trust).
My father passed away a few weeks ago at the age of 91. Three years prior, I had been appointed his legal guardian because he had had a mild stroke and dementia. Physically, he was in very good health but his decision-making and problem solving skills were no longer reliable. Legal guardianship gave me the legal right to make all decisions about his person (physical body). This included all health care decisions, his residence, activities and mental healthcare.
In order for me to be appointed to this role we had to go through the legal system for approval. Initially Dad was appointed a guardian ad litem. This person was appointed by the court to interview Dad and determine if guardianship was necessary. Any immediate relatives were also given the opportunity to challenge the request. Guardianship was then approved by a judge and assigned to me. Each year I was required to give a detailed report to the court system. Topics included his current health, living arrangements, activities, frequency of my visits and state of mind. Legal Guardianship eliminates the need for the Power of Attorney for Healthcare.
Because Dad had all of his legal documents in order, his estate will be distributed according to his (and Mom’s) wishes. She passed five years ago. They each had their own Trust. Her Trust was kept intact after her death, in case he needed to use any of her money after she passed. Now both Trusts will be distributed seamlessly and without any family arguments.
Estate Planning is something most people do not want to talk about but it is extremely important for the sake of those you love and will care for you later in life. Please do not neglect this area of your financial and life planning.