With so many families living in distant states, the holiday season is often the only time everyone is together. A family gathering can provide a chance to talk about major life changes and plans for the future, including estate planning issues. It can be tricky to navigate. However, some conversations are simply better in person. A recent article from Independent Record, “How to tackle estate planning with loved ones this holiday season” outlines topics to cover.
Beneficiary Designations. Upon opening retirement accounts and establishing a life insurance policy, an option is provided to name a beneficiary. This tells the financial institution who is to receive the asset upon the owner's death. There are often contingent beneficiaries if the primary has died or does not want to receive the assets. There are also times when it advised by your estate planning attorney to name a beneficiary on bank and investment accounts.
Beneficiary designations should be checked every few years and when certain triggering life events occur, like death, divorce, or marriage. Some financial institutions have default beneficiary designations, so the owner should also have this information, as the default beneficiary may not be what the owner wants. If an asset has a beneficiary designation, the beneficiary receives these assets outside of the Will. Therefore, the provisions of a person's Will do not dictate how beneficiary-designated assets are distributed. Tax treatments of these instruments may differ, so they should be reviewed with an estate planning attorney to see how they work with the estate plan.
Power of Attorney. The POA is a document allowing an individual to name someone to make decisions on their behalf if they are unable to do so for themselves. This document should be discussed with the chosen person, usually a spouse, adult child, trusted friend with their consent. If there are issues with family members, a non-family member may be a better choice.
There are different types of POAs. A Durable Financial POA takes effect immediately and does not expire unless the principal (the person who is preparing the document) revokes it. A non-durable POA is valid for only a specific period of time, such as giving an Agent the power to handle only a real estate transaction. The Durable Healthcare POA is also needed for another person to be involved in medical care. Spouses are not automatically given these rights, so this document is important. The Healthcare Power of Attorney should contain a HIPAA release, so the Healthcare Agent can talk with doctors and others involved in medical care.
Wills and Trusts. If there is no Will, the person’s assets are distributed according to the laws of the state in which the person had residence, which, in most cases, is decided based on kinship. Most people opt to have a Will to decide how their assets are distributed and to ensure that the process runs smoothly for their heirs.
Trusts establish a separate legal entity managed by a Trustee, who also oversees distribution at the time indicated in the language of the Trust. An experienced estate planning attorney creates a Trust to meet the specific needs of the Grantor. One example of the use of a Revocable Trust is when someone owns real estate outside of their State of residence. Owning the out-of-state property in a Revocable Trust can avoid the need for probating in a second state.
It’s a good idea to talk about these issues while the family members are well and able to discuss them with a clear head. An estate planning attorney will help with guidance and could also help figure out how to navigate issues when potential conflict exists. During and after the holiday season, estate planning protects loved ones and ensures that wishes are followed.
Reference: Independent Record (Nov. 25, 2024) “How to tackle estate planning with loved ones this holiday season”
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