The Basics of Estate Planning 3/25/2010
The importance of documenting the senior’s wishes about health care, property, and money:
Estate planning has become an important part of life for everyone, rich or poor. Preparing fully for disability and death can involve many decisions about property, money and health care. Being fully prepared ensures a senior’s wishes for themselves and their loved ones are carried out. Thoughtful estate planning can minimize the taxes heirs pay and help avoid costly litigation. It can involve creating legal documents, such as durable powers of attorney and living wills, that designate caregivers or others to make financial and medical decisions for incapacitated seniors and set limits on life-prolonging treatments. It also means creating wills, trusts and other legal documents to ensure a smooth transfer of all property and assets after death.
Without effective estate planning, caregivers don't have the tools they need to look after someone who's disabled. A caregiver may not be able to make sure bills are paid or approve critical medical procedures unless the caregiver goes to court. Without legal instructions on life-prolonging treatments, caregivers are powerless in their dealings with doctors and hospitals. Many Americans don't start planning for disability and death until the last moment, when it is sometimes too late to ensure a smooth transition for spouses, children and others. Caregivers are often involved in helping gather information about wills, trusts and other documents. If you're helping a senior develop an estate-planning strategy, you should weigh such factors as age, health, children and economic status. The challenge is tailoring the plan to the individual.
Basic components of estate planning:
- Living wills and durable powers of attorney
- These make sure seniors' affairs are taken care of and wishes respected if they become incapacitated.
- A living will tells doctors what lengths to take in using respirators and other devices to keep a terminally ill patient alive. It either can limit procedures or direct full treatment. In many states this is called a directive to physicians or a health care directive.
- A durable power of attorney for health care authorizes a person, often the caregiver, to make medical decisions for a disabled patient. It's also called a health care proxy in many states.
- A durable power of attorney for finances designates a person to handle all day-to-day money matters - to pay the senior's bills and taxes, run a business, buy and sell stocks, collect retirement and other benefits, sell assets if needed to cover medical costs and the like.
If you are concerned that your living will and durable power of attorney documents will not be readily available in an emergency, you may want to register them online on the Health Care Directive Registry. Go online to: www.sos.idaho.gov
Ways to transfer property:
Wills and living trusts transfer property after death. Without such documents, money, homes, stocks, art and other property will be distributed according to state law - and may not go where the deceased person would have desired.
Wills and trusts offer different advantages - often a combination works best. Trusts have become popular substitutes for wills because property held through them does not have to go through probate. But wills are better suited to some situations and can save on inheritance taxes.
Life insurance policies, Investment Retirement Accounts and 401(k) accounts should have designated beneficiaries so the money goes to whomever the senior desires.
Final arrangements:
Funeral? Burial? Cremation? Make sure the senior puts in writing any thoughts about the type of ceremony or service desired. This can be general or detailed, but it should be done in a document separate from the will.
Identify a funeral home or memorial society with which the senior feels comfortable that can help make preparations.
Shop in advance for a mortuary, casket, crematorium, urn, cemetery plot, headstone - whatever fits the senior's needs. Costs vary widely.
Consider prepaying the funeral costs. Not only will the senior's wishes be implemented, it makes it much easier on the family during a trying time - and the funeral home may guarantee the price.
Know where instructions have been left and tell other family members. The document needs to be accessible on short notice, so keeping it in the senior's safe deposit box or locked in a drawer at the lawyer's office is not a good idea.