At some point, most adults consider an estate plan. If you are unsure about yours, it is one of the ways to put your affairs in order before you pass away. The overall plan is usually completed by an attorney. However, to be thorough, you should have your accountant or financial advisor looped into the process. They provide a somewhat different aspect to the process and can be invaluable in saving tax dollars for your beneficiaries. In addition, the accountant can be part of the team that helps the survivors in the years that come.
The Will
This is probably the cornerstone of an estate plan. It is a legal document that states how assets will be distributed after death. It can also include things like custody and care of minor children and specific bequests like family jewellery.
Realize that for retirement plans, insurance policies or IRAs, the beneficiary designations will prevail. So, when you start your estate plan, verify who those beneficiaries are and take that into consideration when distributing your assets.
Trusts
There are certainly valid reasons for establishing a trust under a Will. Sometimes it is to benefit a disabled member of the family, to help someone who likes to spend more than they should, or to prevent bickering among the heirs. If it is created through the Will, it is called a testamentary trust. There can be benefits to creating a living trust for tax reasons.
Power of Attorney
This is a document that allows another party to act on your behalf. When it deals with the financial end of things, it is called “attorney in fact”. If it is established as a “durable” power of attorney, it will continue to be in effect even if the individual is incapacitated. If the power of attorney does not take effect until the individual is actually unable to conduct business, it is referred to as “springing”.
It is not unlikely that an accountant would be considered to assume that power of attorney since it generally deals with financial matters. It can be drawn to take care of specific tasks like dealing with personal property or it can be very broad and deal with all financial matters. The document ends when the individual passes away.
Healthcare Power of Attorney
Similar to the power of attorney, this one is specific to health issues. Again it can be limited or very broad.
Living Will
This is very much like a healthcare power of attorney, but it is restricted to decisions concerning the end of life. It goes into effect in the event of a serious accident or a terminal illness and usually directs whether any, or which, life sustaining measures should be taken.
As you decide which of these documents will be pertinent to your situation, you will probably consult your spouse and/or close family members. While an attorney will be the person to actually draft the documents for your review and eventual signature, you may want to consult with your accountant or other financial advisor and have them involved in the process.
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- The Capex Team