4 Things to Help You Plan For the Worst
Today we are going to talk about 4 things everybody should do to help you plan for the worst. These steps will make it easier for the people you care about the most.
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4 Things to Help You Plan for the Worst
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Today, we are talking about 4 things that everybody needs to do to help plan for the worst. “The worst” means your death or becoming incapacitated. These steps will help your loved ones move forward more efficiently.
Some of this involves legal documents, and we are not attorneys. We cannot offer you legal advice. We are sharing some of our experiences to make it easier for people to handle these situations.
1. Name Beneficiaries
The first item is naming beneficiaries. Certain types of accounts do not have to go through the probate process. IRAs, retirement plans, life insurance policies, and annuities all have beneficiary designations. When you die, those assets go directly to your beneficiaries.
It is important to name those beneficiaries and keep those designations up to date. This helps avoid future problems. If you do not name beneficiaries, these assets then go to your estate. This involves the probate process. This mistake can result in extra costs, and potentially some extra income tax costs.
2. Durable Power of Attorney
The second thing everyone needs to have is a durable power of attorney. This is a legal document prepared by a lawyer.
A durable power of attorney allows you to name someone to make decisions on your behalf. This goes into effect when you become incapacitated.
A durable power of attorney allows the person you name to make “business decisions” on your behalf. For example, it will allow them to
- pay your bills
- buy or sell investments
- sign checks
- sign your tax return
Not having a durable power of attorney can create difficulties. Your loved ones will have to go to court and have a guardian appointed for you. This takes time and money at a stressful and inconvenient time.
The third item everyone needs to have is a will. A will is a legal document prepared by an attorney.
Having a will allows for an orderly distribution of what you own to go according to your wishes. If you die without a will, your state’s intestate rules apply to your assets. This can add confusion, hassles, and red tape to the process.
4. Health Care Directives
The fourth item everyone needs is healthcare directives. This is a healthcare power of attorney and a living will. The healthcare power of attorney appoints someone to make healthcare decisions for you. If you need surgery and cannot sign the form, your appointee can sign the medical orders for you.
The living will deals with end-of-life decisions. It allows you to specify what means you want used to keep you alive. It allows someone to make that decision for you.
What About a Trust?
A trust can be a useful tool, but it may not be beneficial for everybody. Even if you have a trust, you still need to take care of these four items.
A trust is something you should discuss with an attorney to see if it makes sense for you. There are extra costs involved, and sometimes the cost does not add value.
If you are not sure who to talk to about these legal documents, please contact us. We can provide referrals to local attorneys who specialize in estate planning.
Talk to a Certified Financial Planner™ Professional
About the Author
Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors. He specializes in helping hard working, middle class families plan for retirement.