Travis Teague, CFP®, AIF®, CPFA
You may have seen in the news lately the conflict over Aretha Franklin’s estate. The Queen of Soul passed in 2018, and years later, her loved ones are still caught in legal trials thanks to the existence of multiple wills, including one found under a couch cushion.
As heart-wrenching as this may be for her loved ones, it does highlight a universal truth: setting up a clear and thorough estate strategy can help families manage stress and legal battles after we’re gone.
Estate planning may seem like a heavy topic, but it’s an extremely important discussion — no matter your age or state in life. Life may be unpredictable, but with an estate plan in place, your loved ones will clearly know your wishes, should you become incapacitated or die.
IN THIS ARTICLE:
- Estate planning is the process of legally demarcating how your assets will be divided after your death.
- Without an estate plan in place, your assets will sit in legal limbo as courts determine who will receive your assets based on your state’s intestacy laws.
- Your estate plan should also include an incompetency plan.
What is estate planning?
Estate planning is the process of determining how your estate will be allocated once you die or are unable to make decisions yourself.
Your estate plan can include multiple documents:
- A legal will
- Powers of attorney and durable powers of attorney
- Beneficiary forms
- A certificate of trust
Estate planning can involve the guidance of multiple service professionals, including your attorney, financial planner, CPA, and life insurance agent.
What is included in your estate?
An estate is your total net worth at your death. Included are all personal assets: real estate, personal property, accounts, investments, business interests, and intellectual property. Below is a breakdown of assets that are all considered part of your estate:
Real Estate:
- Primary Homes
- Rental Homes
- Vacation Homes
- Commercial Properties
Personal Items:
- Vehicles
- Boats
- Motorcycles
- ATVs
- RVs
- All Personal and household items
Accounts, Investments & Interests:
- Checking Accounts
- Savings Accounts
- Money Market Accounts
- Certificates of Deposit
- Safe Deposit Boxes
- Retirement Accounts
- Brokerage Accounts/Mutual Funds
- Stocks
- Bonds
- Annuities
- Life Insurance
- Business interests (LLCs, Corporations, Partnerships)
- Mineral Interests
What happens if you don’t have an estate plan in place?
Without a valid will in place prior to death, your surviving family members face a load of legal headaches as your estate sits in limbo. Your assets are frozen until the court decides who the beneficiary or beneficiaries will be, as determined by your state’s intestacy laws.
By ensuring you have a legal will in place properly allocating your estate, you’ll ensure your family has one less worry to weigh them down after your death.
Don’t forget to include an incompetency plan in your estate plan.
It can be easy to think of estate planning only in terms of death, but it’s also important to make an incompetency plan.
General Durable Power of Attorney
For the purpose of this post, we’re going to discuss general durable power of attorney in regards to financial management. However, you’ll also want to plan for general durable power of attorney in regards to making healthcare decisions on your behalf.
There’s general power of attorney, and then there’s general durable power of attorney. Yes — that one word carries enormous legal weight.
Power of attorney (POA) is a document that gives another individual (your agent or attorney-in-fact) the legal right to handle legal, financial, or medical matters on your behalf. But without the proper legal language, this ordinary POA expires should you become mentally incompetent.
On the other hand, a durable power of attorney includes the proper legalese to ensure that the POA remains effective, even if you become incompetent. You can specify whether this durable POA takes effect immediately, or only if you should become unable to make decisions yourself.
Your POA agent does not have to be a lawyer — it can be anyone of your choosing. However, it’s important that you choose only someone whom you deeply trust to handle serious financial and medical matters.
Power of Attorney for Retirement Accounts
You’ll face additional red tape with retirement accounts. Generally, retirement account custodians won’t accept a general durable POA. You’ll need a separate POA covering your retirement accounts. Talk to your financial advisor and attorney to ensure you have the right documents to cover your retirement plans.
How do you make an estate plan?
If you don’t yet have a legal will in place, this is the first step in your estate planning process — and an urgent one, at that. This is an important document for anyone; it’s risky to assume that you can wait until a certain age to create a will.
Work with a Landmark Financial advisor.
While estate planning can seem like a huge undertaking, you don’t have to do it alone. Our advisors at Landmark Financial can make the process as smooth as possible. Contact us to get help with your estate plan.