Is Your Estate Plan Missing this Important Element?

Filed under: Taxes and Planning, Estate Planning

Do you have a will or trust document to distribute your assets after you pass away? If so, you may be one step ahead of many of your fellow Americans. A survey from Rocket Lawyer found that 51 percent of Americans between the ages of 55 and 64 don’t have wills. It also found that 62 percent between the ages of 45 and 54 are without a will.¹

A will can certainly help your loved ones and the probate court make sure your wishes are met after you pass. However, a will alone may not represent a complete estate plan. You’ll likely want your estate plan to also cover another serious condition retirees may face: incapacitation.

Incapacitation happens when you are physically or mentally unable to care for yourself and make your own decisions. It may happen to retirees because of cognitive diseases like Alzheimer’s. However, incapacitation can also occur after major surgery, illness or a number of other physical ailments.

The problem with incapacitation is it leaves a decision-making void. Your loved ones may argue over which decisions are in your best interest, or they may squabble about who is in charge. Your doctors may not know how you want to be treated, and their decisions could go against your wishes.

The good news is there are steps you can take in your estate planning to protect yourself against incapacitation. The three documents listed below offer different forms of protection for your health and your finances. Talk these over with your financial professional to see if they belong in your estate plan.

 

1. Living will

A living will is an advanced medical directive that provides your healthcare team with specific directions for treatment. In your living will, you will state what actions you want doctors and nurses to take in certain situations.

For instance, you may state that if you’re in a coma, you don’t wish for doctors to put you on a ventilator or feeding tube. You may say you don’t want dialysis or you don’t want extreme measures taken should your heart fail.

According to the American Journal of Preventive Medicine, only 26 percent of Americans have advanced directives such as a living will. Most estate planning lawyers can help you draft your will, and it’s usually a fairly affordable and simple process.

 

2. Durable power of attorney/h2>

The power of attorney document designates a trusted friend or loved one as your financial and legal decision maker should you become incapacitated. Whomever you designate as your power of attorney will have the authority to make any decision you could make for yourself, for instance, they could write checks, take out loans, sign contracts and make investment decisions on your behalf.

Obviously, your power of attorney should be someone you trust. You may want to go ahead and draft the document, but then have your lawyer hold onto it until it is actually needed. In some states, the power of attorney goes into effect as soon as it is filed in court.

 

3. Healthcare power of attorney

A healthcare power of attorney (HPOA) operates much like a traditional power of attorney, but only for healthcare decisions. For instance, your healthcare power of attorney may be able to make decisions about your treatment, but may not be able to write a check from your account or take withdrawals from your investment accounts.

A healthcare power of attorney differs from a living will in that the HPOA gives one person broad decision making ability in any situation, versus the specific instructions for certain situations in the living will. Again, you will likely want a trusted friend or loved one to serve as your HPOA.

Talk to your financial professional or estate planning attorney for more information about these documents or any others you may need to add to your estate plan.

 

¹http://www.forbes.com/sites/nextavenue/2014/04/09/americans-ostrich-approach-to-estate-planning/#7a0ee838f07b
²http://www.cbs19.tv/story/31527098/nearly-two-thirds-of-americans-dont-have-living-wills-do-you

 

Ambrose Financial and Insurance Services, LLC does not offer legal or tax advice. Please consult the appropriate professional regarding your individual circumstance.

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15512 – 2016/3/29