In my lifetime, several United States presidents have passed away, and one thing I notice about presidents is, each of them planned out their funeral arrangements in detail. I believe we can all take a lesson from this when making our estate plans.
Approximately 68% of Americans die without a last will and testament. That is a huge percentage of the population. I am confident that a similar percentage of Americans do not have a financial power of attorney or an advanced health care directive. Not having these basic estate planning documents can be devastating to you and your family.
For instance, if a person does not have financial power of attorney, no other person—not their spouse, not their children—can make financial decisions for him. If a person owns a home, no one would be able to sell his home. If the person owns a 401(k) or IRA, no one would be able to access those accounts on his behalf.
In situations such as this, someone (for instance, the spouse of the incapacitated person) has to file for guardianship over the person. A guardianship is a court procedure that costs thousands of dollars to implement and involves significant court oversight. Even if the court appoints the spouse as the guardian, the court will supervise what the spouse does with the ward’s (her spouse’s) assets.
Similarly, if a person does not have an advanced health care directive, then no one can make health care decisions for the person if he is unable to make those decisions for himself. While doctors and hospitals might listen to family members, doctors and hospitals are not obligated to listen to family members who have not officially been appointed as the person health care proxy through an advanced health care directive.
And now, with the health privacy law (HIPAA), few medical providers or health insurance companies will share medical information with anyone other than the person. We all know what it is like to deal with health insurance companies—these companies often are the ones making life or death decisions for people. Imagine if the health insurance company would not even speak with you about your spouse because you do not have a HIPAA release.
A failure to have a Will could leave your family in a tremendous state of confusion. Who will administer your estate? Will your property pass to the people you want it to pass to, and not to those who you do not?
It is obvious that every adult should have these basic estate planning documents—a last will and testament, a financial power of attorney, and an advanced health care directive. But there are other things you could do that would greatly help your family.
When a client leaves my office, I put all of his estate planning documents in a binder. I tell the client that he can put other information about himself in this binder too: a list of his assets, recent financial statements, copies of life insurance policies, burial plots. The client could explain how he wants his funeral managed. Does he want to be buried? Cremated? These are not pleasant things to think about, but it is easier for you to explain what you want than to make your family guess what you want.
Oftentimes, family members have no idea what assets you own. Over our lifetimes, we tend to acquire a variety of assets. If you do not list those assets, then chances are your family will miss an asset.
You should also ensure that if you have designated beneficiaries on any asset—such as an IRA—that the beneficiary designation is correct and replicates the plan you have in your Will. For instance, maybe you named your spouse as primary beneficiary and your child as contingent beneficiary, but since you did that, you have had a second child. Ensure that the second child is also named as a contingent beneficiary.
Reviewing your estate plan every few years is a quick and healthy exercise. If you spend a small amount of time on ensuring that your plan is current, your family will have a lot less to worry about after you pass away.