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Wednesday
Mar162011

Japan Relief and Estate Plans

JAPAN RELIEF CHALLENGE! I know on posts I am usually reaching out to you, my awesome readers, to help support Financially Digital and Financial Literacy. Today I’m reaching out to give aide to a much bigger and life supporting cause. I want to issue a challenge to you all that the amazing patronage here can raise $5,000 to be donated to the Salvation Army’s Japan Response efforts. Everyone that donates gets their name and website published on the Benefactors Page as well. I will post a weekly update to show you all where we are and how we can make an impact together. I’m also trying to come up with something to give away/do if we hit that mark so if you can think of anything you’d like to see just leave it in the comments below!

One of the things that I hear all the time, and it kills me a little bit more every time I hear it, is that I don’t need an estate plan. Even before you read on any further; what are do you think when I say that yes, even you, need an estate plan? You probably think that you can do it later, you don’t have anything worth planning for, or that only elderly people need estate plans. Well, you’re wrong! I’ve been involved in the planning process of so many estate plans it’s hard to remember and the best thing about it is that they come in all shapes and sizes. Today, I want to introduce a few of the foundation documents you should have in place along with what you should already have set up in your every day accounts.

The first and probably the most well known is a will. A will is a document that leaves instructions for an executor to carry out when you die regarding the allocation of all the stuff you’ve accumulated during your life - your estate. Wills can be as simple or as complex as you see fit  and it allows you to hopefully shelter or manipulate your assets so they are protected from as much tax liability as possible at death. Now a will really is just instructions and very important ones. You can’t just write down your thoughts on a napkin before you kick the bucket you have to be of sound mind, the age of majority, have your signature, as well as witnesses. There is also a living will you might want to give consideration too. A living will is separate from your testamentary will that leaves instructions or creates planning vehicles in the event of prolonged end of life medical treatments.

The next estate planning tool in is a power of attorney. These come in a few flavors with the most popular being springing and durable powers of attorney. A power of attorney is a document that allows you to give the right to make business, medical, and financial decisions to someone else. This is another document that really just leaves guidelines and instructions to the person you gave your signing rights to. That person has an obligation to act in your best interest as welll as they are your biggest fiduciary at that point. These are really important as foundation tools because in the event that you are unable or unavailable to run a business or manage an estate, not just by being dead, a power of attorney allows your wishes to be carried out. Also good for selling property, managing bank accounts, settling claims, executing investment transactions, and even handling taxes.

The last of the biggest foundation documents is your health care proxy. It’s kind of like a power of attorney in that it allows someone to make decisions on your behalf. The biggest difference though is the health care proxy has to do with making medical decisions, most commonly with end of life treatment. They are activated by either the patient being incapacitated or just mentally unable to make decisions for yourself. Along with the ability to make decisions a health care proxy can also have specific instructions or wishes regarding your care that you would like to be carried out for you when you can’t make them for yourself.

A close fourth would actually be a category of vehicles - trusts. I won’t bore you with all the different trusts are and how they work in this post but if you want to know about NIMCRUTS and GRATS maybe another post. Trusts are great ways to remove assets from your estate, set them aside for what ever you want and hopefully lowering your taxable estate. You basically have documents set up with instructions for assets that you set aside and give the actual decisions making power to a separate person.

For everything I’ve mentioned above it’s best to work with professionals when constructing your financial and estate plans. Can you do it yourself - yes. I definitely don’t recommend it though because attorney’s and planners will have insights that only come with experience and will be able to plug that experience into your plan making sure you are covered for whatever life throws at you. Plus knowing you have professionals that can go to bat for you always makes me feel all warm and fuzzy inside. You can do a few things though to make sure you are as prepared as possible.

The first thing is make sure that you have all of your beneficiary designations all filled out and current on all of your accounts. Bank accounts, life insurance policies, investment accounts, and even a deed to your home can be beneficiary designated. In the event something happens those are clear transfer lines that will keep your assets out of the probate limbo muck. Another thing you can do is keep all of your important documentations in a safe place. I recommend something like a fireproof filing cabinet. Things like those brokerage contracts, estate planning original documents, life insurance contracts, and real estate paperwork should be all in one very safe and accessible place. In the event something happens to you your loved ones won’t have to hunt to make sure your carefully laid plans get executed. One of the last things and probably the easiest and the hardest things to do is just talking to your loved ones about your wishes. Talking about death is never easy but the more vocal you are about your wishes the easier the end of life process will be. So, maybe not you, but if you know someone coming to their final times make sure you ask about the things they want both for their assets as well as their care. You’d be surprised that something this simple could have such a huge impact.

 

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