So, the Life Organizing posts in G.O. with C.G.O. Month have been prompting you to take some measurements in your life that help you for the future. We’ve talked about making good new years resolutions, taking safety measures and creating emergency contacts, and health numbers you should know. This week, we focus on something I think many of us think about, and know that it’s something we *should* pay attention to, but haven’t quite gotten around to: Getting the right legal paperwork for our future in order. I’m not an attorney, nor do I play one on tv, but here’s a decent start to understanding a bit of the landscape on the important paperwork we should all be thinking about.
There are lots of reasons people put this off:
- They think there’s nothing to worry about; they’re very healthy
- They think it’s not important if they don’t have kids
- They believe they don’t have enough assets to be a big deal
- It involves having uncomfortable conversations with others
- It may include topics that a couple doesn’t see eye to eye on
- Afraid It might involve getting a lawyer, and they don’t know one or don’t want to spend the money
- It’s an easy thing to put off, and so we do, over and over
- and, so on…
Do any of those sound like YOUR reasons?
Let’s break down the basics: What do you need, what to they do, why do you need them…
1) Wills and Trusts
A will is often the first thing that comes to mind when we think about legal documents for preparation. A will provides clarity for your wishes regarding the inheritance of your assets, and how liabilities are to be handled. An executor is named, beneficiaries are outlined. Just having a will isn’t all you need, however, and even when individuals have wills, families have wound up in court to challenge the will.
A trust is another type of legal entity, and you put one in place to put conditions on how particular assets may be distributed, and people will utilize these to help plan for the tax impact that gifts and inheritances may generate upon transfer of those assets. There are many different kinds you might look into, like revocable, irrevocable, bypass, and others. A very basic difference between revocable and irrevocable relate to how much independent control you have on those terms and conditions while you’re still alive.
According to CNN Money, “Here’s a good rule of thumb: If you have a net worth of at least $100,000 and have a substantial amount of assets in real estate, or have very specific instructions on how and when you want your estate to be distributed among your heirs after you die, then a trust could be for you. Trusts are also great for minimizing estate taxes or protecting your estate from lawsuits and creditors.”
2) Durable Financial Power of Attorney:
This document allows for you to arrange for someone to manage your finances if you are incapacitated. You can provide broad power to handle everything, or you can provide power for limited activities, such as using your assets to pay every day expenses for you and your family, to manage investments on your behalf, to transfer money to a trust, to operate your small business, to file and pay your taxes, etc.
For these you may need to arrange for specific arrangements with different financial institutions to complete their forms, too. Be sure to investigate the requirements of all the institutions in which you have money or investments.
3) Advanced Directives:
- A Living Will / Medical Directive: this tells medical professionals and your family what your wishes are in terms of treatments you want to receive or decline, and under what conditions, if you’re unable to make or communicate decisions on your own
- A Health Care Power of Attorney states a particular person (spouse, family member, friend, etc.) and, ideally, a secondary designee, who can make decisions on your behalf if you cannot do so. This is an important distinction to just having a living will, which may only specify certain treatments, decisions or criteria, and not all medical emergencies and decisions will fall into those exact categories. Be sure to have a HIPAA release, so that there are no barriers for your proxy to have access to any medical records, as well.
- A Letter of Instruction: Different from a will, but related to what your intentions are upon your death. This may include things like funeral planning, contact information for family or friends who should know about your death, and for important numbers related to things like insurance agents and financial advisors.
4) Kids Protection Plan:
For a lot of people, having children and thinking about their guardianship, should something happen to you, is the first real trigger to gathering legal documents in the first place. In addition to guardianship (which is also often outlined in a will), a Kids Protection Plan allows for outlining intentions for care even in a short-term period (in the event the permanent guardian is not immediately available). Think of it as a “what happens in the first few days if the worst happens to us” plan for your kids (Think: “child protective services takes my children because I have no other plan in place” as a worst case scenario you’re looking to prevent. You can outline everything from short-term guardian to medical decision-making proxy to communication plans. There are plenty of commercially available kits to review, or you can speak with your attorney about what you’d want to have in place.
Got all these already? That’s great!
Now ask yourself: Are they current and up-to-date? These legal documents should be revisited regularly to make sure you’re needs are always being reflected.