Advance Health Care Directive

An Advance Health Care Directive allows you to plan for your medical needs if you become disabled. This document allows you to name the person(s) you wish to make medical decisions for you if you can’t make them for yourself. It also allows you to state your wishes regarding life support and organ donations.

Financial Power of Attorney

If you should become disabled, someone must be available to manage your finances. A financial power of attorney (POA) allows you to name an agent to sign documents on your behalf, use your funds and income to pay bills, manage your personal and retirement accounts, and invest your accounts for extra income. With the help of your attorney, you can tailor your POA to fit your financial needs.

When you create a POA, you can choose between an Immediate and a Springing POA. An Immediate POA allows your financial attorney-in-fact to assist with your assets immediately. With a Springing POA, your attorney- in-fact can only manage your affairs after you become incapacitated.

Revocable Living Trust

A Revocable Living Trust has many benefits including the fact that it can be used for incapacity planning. Every asset that you fund into your Trust can be handled by your successor trustee during your time of disability.

Not Diversifying

Diversifying your investment means putting your capital into a variety of money making opportunities. If you prefer safe investments, focus on money market accounts, and government bonds. If you are also concerned with inflation, the stock market is a place to potentially grow your funds over a long time horizon. With any investment, remember to diversify. Investment diversification can help provide both safety and growth. Asset Allocation and/or Diversification of your overall investment portfolio does not assure a profit or protect against a loss in declining markets

Removing Funds Early

When you have a retirement account, you should leave the money in there until you retire. If you take any or all of it out early, you may be assessed a penalty, and you may also lose some of your investment earnings. For example, if you have invested part of an IRA in a Certificate of Deposit, and you pull it out before the five year required investment period, you will lose three months of earnings.

Not Investing

Another common retirement savings error is not investing your savings. When your funds sit for a long period of time in just one account, you run the risk of the interest earnings from that account being less than the rate of inflation. When this occurs, the value of your funds will decrease over time. Investment isn’t just about growing your reserves; it is also about keeping the value of your money above the rate of inflation.

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Along with your medical decisions, the Directive also lets your health care advocate and doctors know your wishes regarding how long you should be left on life support, if it is needed.

Helps Avoid Conservatorship

The main benefit of a medical directive is that it helps you to avoid a conservatorship, which is a court decision that declares you mentally disabled and names someone to make choices for you. A conservatorship takes your choice of medical agent out of your hands and places in the hands of a court who may not know you and therefore may not be able to decide what it best for you. Often in a conservatorship, your chosen guardian may make a medical decision such as leaving you on life support, when you would prefer to be removed from it. To avoid this, make sure to legally document your medical wishes.

Must Comply With State Laws

In order to create an advanced medical directive, you must be an adult and mentally stable at the time that you sign. If a court deems you were already mentally disabled when you created your Directive, a conservatorship may be instituted instead.

You should speak with your attorney to determine what other rules apply including: who can sign as a witness and what provisions you can include.

Organize the Estate

The first step is to identify what the estate includes. Try to locate all estate documents. If you have been appointed by the court, you may not have to worry about this step since it may have already been determined that no estate documents exist.

If a Will does exist you should use it to list all beneficiaries. If no Will exists, heirs will be determined by state law. In either case, you will have to locate assets and debts on your own.

Probate the Estate

Once you have a general idea of the estate, you should meet with an attorney to begin probate. Probate is the court-supervised process by which you will settle the decedent’s affairs.

Every estate asset must be appraised for the date of death value. Next, with the help of an attorney, you must contact all known creditors. In case any creditors are unknown, you will place a notice in the local newspaper.

You will use estate funds to pay debts. If funds are not available, you may have to sell property. You will also be responsible for paying all taxes associated with the estate from its assets. You must file the final income tax return for the decedent, as well as the estate tax return if estate and inheritance taxes are applicable. You may wish to contact an accountant for assistance.

When all taxes and debts have been paid, the Court will order you to give the beneficiaries what remains of the estate. If there was no Last Will and Testament, your attorney can help you determine who the heirs at law are based upon the state intestacy laws.

It is very important to make sure all taxes and debts are paid and you receive a Court order before you hand out inheritances. If you do not, you will be financially responsible for unpaid debts and taxes.

What Revocable Does

A Revocable Living Trust is a common estate planning document that can help property to easily pass from a decedent to his or her beneficiaries. Because a Revocable Living Trust allows you to make changes as you need, you can alter your Trust throughout your life. You can fund new property or assets into it, change your beneficiaries or even name a new successor trustee.

There are three common reasons to use a Trust. First, a well executed and fully funded Trust can help your estate avoid probate. Second, you can use your Living Trust as part of a disability plan. If you should become mentally incapacitated, your successor trustee would step forward and manage your Trust assets for you. Many people also use a Trust for privacy. A Last Will and Testament is a public legal document. After your death, anyone can obtain a record of your holdings. With a Trust, your estate assets and beneficiaries are kept private.

One problem with a Revocable Trust is that you cannot use it for asset protection. The assets within are still considered yours.

What Irrevocable Does

An Irrevocable Trust is one you cannot change after it is created. This type of trust is common for asset protection. Once you transfer items into the Trust, they no longer belong to you and cannot be used to settle a debt or lawsuit. Irrevocable trusts are also a great way to minimize estate and income taxes. Because the assets in such a trust do not belong to you, they will not be included in your estate’s tax liability. A charitable irrevocable trust allows you to donate to a cause of your choice upon your death and receive an income tax deduction for the year that you place funds within the Trust.

When Revocable Becomes Irrevocable

If you have a Revocable Living Trust, it will become Irrevocable upon your death. Your living trust can break apart into several irrevocable lifetime trusts for the benefit of your spouse, children and grandchildren or other beneficiaries.

Executor Chosen by the Court

If you die without a Will, a judge will select your estate executor. Although, the judge may choose the person you would have chosen anyway, the selection process could cause family disharmony.

Guardians Chosen by the Court

No one expects to die young, but if you do and you have minor children they must live with someone else. If you do not have a Will and do not name a guardian, the court system will choose a guardian for you. This could lead to your children becoming wards of the state if no family member agrees to take custody. On the other end of the spectrum, there could be several family members embroiled in a drawn-out custody battle. During this time your children could encounter instability when they most need stability and love.

No Money for Expenses

When you pass away your loved ones will have to pay for your funeral costs and court expenses. If your assets are tied up in probate, they will have to use their own money to cover these costs. If they do not have money, they may have to take out loans. When you create a Will and an estate plan, you can take measures to make sure money is readily available for your family to use immediately after your death.

Long Probate Process

Many estates have to endure probate, which is a court process used to pay your final debts and pass out property to heirs. Even with a Will. it can take a year or more. When you do not create a Last Will and Testament to express your wishes, you are setting your family up for a n even longer settlement period. With an intestate estate, state laws must be examined to determine proper heirs at law. This is a time -consuming process and can often leave a family member disinherited or cause bitterness between heirs.

No Business Estate Plan

If you don’t include your business in your estate plan, then it may not survive your death. If you have full or partial stake in a business, it will be considered a part of your estate upon your death. If you have not named someone to take over after you die, or if you have multiple partners fighting over your part of the business, your business may flounder while the matter is worked out in probate court. Because probate is a lengthy process, your company may be greatly affected by a large time period of indecision, disagreements and possibly mismanagement.

Dissolve the Business

If you own a family business, you may wish to pass your business along to your family members. What if no one wants to take over? Even if a family member is running the business with you at the time of your death, he or she may wish to take the opportunity to pursue other ventures. In this case, since you have created no plan and no one is willing to take over, your company will have to be sold or dissolved. If you plan ahead, you will already know that your business will close after your death, and you can make prearrangements to ease the process. If you do not, unwilling family members may be placed with the burden of running the business for a short time while probate works out a sale.

Passing on the Business

If someone in your family or one of your business partner’s wishes to keep the business alive after your death, he or she may face opposition from others who wish to sell the business or who also wish to have a say in running the company. If you know that you can pass the business on to a ready and willing person, say so in an estate plan. Like a guardian plan for your children, an estate plan for your business allows for an easy hand off, so your company can maintain stability.