Welcome to the dawning of 2021! Most of us will leave 2020 without any hesitation. 2020 was not the best year for most of us. But you have an opportunity to start 2021 prepared for anything. You can do the responsible thing and get your estate plan in order.
The tumultuous events of 2020 show just how important it is to have your planning in order. Millions became seriously ill from the coronavirus. All too many of them died. When they became ill, those who had their estate plan in order could focus on more important things, such as spending precious time with loved ones.
Even as we hope 2021 will be much better than 2020, it’s important to start out right, by putting an estate plan in place.
What’s an estate plan? At its most basic, it’s a set of instructions about how you want your affairs handled if something happens to you. It’s a message that shows your loved ones you care. A basic estate plan includes a Healthcare Power of Attorney, a General Durable Power of Attorney, a HIPAA Authorization, a Will, and typically also a Trust.
First, what’s a Power of Attorney? It’s a document by which you appoint someone as your “Agent” to act on your behalf. If that Agent is unwilling or unable to act, the document can appoint one or more successor Agents. In other words, you give someone else (the Agent) powers you inherently already have yourself. With a Financial Power of Attorney, otherwise known as a General Durable Power of Attorney, you appoint your Agent to make financial decisions for you. The Power could be drafted to be “immediate.” In other words, the Agent would have the power to make decisions regarding your financial assets right away and without regard to your ability to make those decisions for yourself. In most states, you could make the Power “springing,” in other words it would only become effective upon you not being able to act for yourself because of incapacity. A Power of Attorney is “durable” if it continues notwithstanding you having incapacity. A Power of Attorney which is not durable would not allow your Agent to act during your incapacity.
A Healthcare Power of Attorney appoints an agent to make medical decisions for you when you are unable to do so for yourself. A HIPAA Authorization appoints an agent to access protected health information.
It’s important to keep your Powers of Attorney up-to-date so that you have the people you want as your agents. The agents you select under your Powers of Attorney are vital to your incapacity plan. Make sure you keep the right people in those roles.
Without a Will, the assets titled in your name go as set forth in state intestacy law. This typically is not exactly how you would like. A Will allows you to select to whom and how you want your assets to go. It also allows you to name who you would like to handle your estate after your death. If you have minor children, your Will allows you to nominate guardians to care for them.
Both intestacy and a Will are subject to a public probate proceeding. Depending upon the state, this can be a lengthy and costly process. If you want to avoid probate and maintain your privacy, you can use a Trust. With a Trust, you transfer the assets to the Trust during your lifetime and can manage them as the Trustee. This allows you to avoid the probate process since the Trust doesn’t die. The Trust has the added benefit of making incapacity even easier. Due to cases of fraud, often institutions more readily recognize a successor Trustee acting on your behalf than an agent under your power of attorney.
Hopefully, 2021 will be better than 2020. Even a basic estate plan will allow you to face whatever 2021 has in store for you. Resolve now to get your estate planning done this year, sooner rather than later.