I started writing this article about a month ago and then last week, my mother-in-law died unexpectedly. Talk about a shocking way to get started on writing this article!
Fortunately, she was an elder care attorney before she retired. So, she had thought through and put in place most of the important documents one needs when a family member dies. However, like many estates, we will still need to take care of a lot of loose ends.
In my and Rick’s experiences as financial planners, having a proper estate plan is number one thing that people put off. After all, who wants to think about your own demise? –Me either! But if you love your children or family members who will have to take care of your business when you are gone, it will be the last, best gift you can give them. To not do it means that you will be leaving a time consuming process to someone without an enforceable road map and you’ll likely default to having the state court system decide how to divide up your assets. Not a good plan.
Here are the four principal estate planning documents that our clients typically need (your needs may differ):
Wills – Directs the disposition of your assets including all of your worldly possessions.
Durable Powers of Attorney – If you should become incapacitated and are unable to communicate (e.g., in a coma), this authorizes another person to act on your behalf. In Massachusetts—surprisingly—spouses are not automatically entitled to make decisions on behalf of their husband or wife.
Health Care Proxies – Authorizes another person to make medical decisions if you are unable to; also allows you to dictate the extent of efforts to keep you alive if you suffer from a serious or terminal illness. If you want to read how bad this can get without one, look up the Terri Schiavo case in Florida a few years back.
Revocable Trust - If you have young children, did you list your 5 & 7 year olds as your contingent beneficiaries on your IRA/401(k)s? Five & 7-year-olds are not legally old enough to make financial decisions. While you may want to leave your retirement accounts to support for your children, a trustee may have to be appointed first before funds can be distributed for the support of your children. A revocable trust can address a number of related issues when you have young children.
Realty Trust – Is owning your home jointly the best way to protect one of the most expensive and important assets you own? It depends on other factors and your individual financial situation.
While not appropriate in all situations, the first three documents are pretty standard for folks who live in Massachusetts. If you don’t have those three, get thee to an attorney ASAP!
What about estate planning software? We hear this question a lot especially with software or apps providing good solutions. If your financial situation is very straightforward, software might be okay. But most of the folks we work with have more complicated finances. As such, they require customized estate planning documents so that their wishes are carried out as planned. If you are a small business owner, widowed, divorced or on your second marriage, or have more than $1 million in assets, hiring a real, live attorney—in our experience—is money well spent and it does not have to be super expensive either.
Not sure how to get started? Give us a call. We’re here to help.
Lyman H. Jackson
Financial Planning Solutions, LLC (FPS) is a Registered Investment Advisor. FPS provides this blog for informational and educational purposes only. Nothing in this blog should be considered investment, tax, or legal advice. FPS only renders personalized advice to each client after entering into an advisory relationship. Information herein includes opinions and forward-looking statements that may not come to pass. Information is derived from sources believed to be reliable. Information is at a point in time and subject to change without notice. Such information may not be independently verified by FPS. Please see important disclosures link at the bottom of this page.