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Money Guide – Estate Planning



The following is adapted from “Living in the Village: Build Your Financial Future and Strengthen Your Community” by Ryan C. Mack.

– Everyone Has an Estate, Whether Large or Small
– Four Key Components of an Estate Plan – Will, Durable Springing Financial Power of Attorney, Living Will, Health-Care Proxy
– Seek Estate Planning Advice From a Certified Estate Planning Professional


– Where to find an Estate Planner
– The Four Key Components of an Estate Plan

There is a big misconception that estate plans are only for the wealthy, but the truth is, everyone has an estate. Your estate includes all the property you own. It’s your clothes, car, tools, shoes, furniture and much more. While your estate may not be as big as Michael Jackson or Elizabeth Taylor, you are still responsible for managing what you have. Deciding how you want you property divided is only one element of establishing a proper estate plan. In Money Guide: Estate Planning we will take you through the documents you need in place to protect you and your family from an unforeseen life event.

DON’T BOOTLEG YOUR ESTATE PLAN….GET PROFESSIONAL ADVICE

A key wealth building principle is to know when to invest in the right professional that will help you excel. After you’ve reviewed the information in our Money Guide, we urge you to talk to a qualified estate planner to assist you in making the proper arrangements. To find a good estate planner, you can log on to the National Association of Estate Planners and Councils website at www.naepc.org. Make sure that you talk to an “Accredited Estate Planner (AEP)” or an “Estate Planning Law Specialist (EPLS)” in your area to assist you in putting together the right plan for you. Many try to do it on their own, but often regret it when critical errors result in thousands of dollars paid in penalties, fees, and excess taxes.

This guide is NOT to replace advice from an estate planning professional. However, we do believe that it is important to educate yourself as much as possible before you see any advisor.

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FOUR COMPONENTS OF AN ESTATE PLAN

Last Will and Testament
This is a written or typed statement that declares your intent of the asset distribution at your death. All too often, families are torn apart without this simple document. EVERY adult needs a will; however, seven out of ten adults in the US pass away “intestate” or without a will. After weeks of court battles and high expenses, the size of your estate can be significantly reduced without proper planning. As a matter of fact, as much as 20 – 30% of all legal fees are earned by lawyers in probate court in lengthy battles that should and could have been avoided. The decision for the distribution of your estate will be left to the courts without the implementation of this simple document. The best way to prepare is to do something now while you can.

When writing your will you become the “testator” if you are a man, or a “testatrix” if you are a woman. It is very important that you are mindful of all of the things that can compromise the integrity of this document. For instance, if you are not of sound mind then you should not be writing your will. If, according to your state, you are not of majority age then you should seek a guardian to assist you in writing your will. Did you and your two witnesses sign the will? This sounds simple, but many times it’s the smallest of avoidable things that can cause lengthy court battles post mortem.

You must also think very carefully about who you will name to be the “executor” or “executrix.” This is the person who inherits the fiduciary duty to carry out the terms and conditions of your will. They will also have to settle all of the debts you leave. Be sure to choose someone who has proven to be competent. It also wouldn’t hurt if they had some degree of financial knowledge. Ask yourself how comfortable you are with this person taking an inventory of your assets, collecting your assets, paying off all taxes and debt, and managing what you have worked all of your life to accumulate. More than likely, the executor will be paid a percentage of your estate as a fee.

When you have a will in place, it is important that you continuously review it at least once every two years and make amendments if needed. Amendments are usually needed whenever you have a major life changing situation such as a birth, divorce, significant increase in income/assets, or even a change in tax law.

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Durable Springing Financial Power of Attorney
This document gives an agent power to act in financial matters on your behalf should you become mentally or physically ill and are judged in a court of law to be incompetent. Without this document, your family will have to hire an expensive attorney to go to court and have someone appointed as your conservator to make decisions on your behalf.

It is important to have a “durable springing” financial power of attorney, because it only takes effect if and when the principal becomes incapacitated. If you have a power of attorney, then the appointed agent retains control over many of your financial matters whether or not you are incapacitated. We don’t recommend trusting anybody that much. However, you would want to have a document that “springs” into action if you are unable to make these financial decisions for yourself. The appointed agent has a lot of power and control and has the authority to administer many responsibilities, including using your assets to pay expenses, handling bank transactions, claiming property you inherit, operating your small business and managing your retirement accounts. As you can see, the agent has a lot of control, so it is very important that you give this authority to the right person.

Living Will
The living will is a document instructing physicians, relatives, or others to refrain from the use of extraordinary measures, such as life-support equipment, to prolong one’s life in the event of a terminal illness. The Terri Schiavo case demonstrated the importance of this document.

On February 25th of 1990, Terri Schiavo experienced respiratory and cardiac arrest. This horrific illness gave her significant brain damage and she was diagnosed with being in a persistent vegetative state. For the next 15 years, she lived in an institution where individuals could not tell if she was coherent or incoherent. Her husband and guardian wanted to remove the feeding tube after the eighth year. However, her parents opposed this arguing that she was conscious. For the remaining seven years of Terri Schiavo’s life politicians, advocacy groups, her husband, and her parents went through a very rigorous back-and-forth judicial process. Terri Schiavo passed away on March 31st at the age of 41. This entire process may have been avoided if there had been a living will and she chose to be terminated earlier.

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Health-Care Proxy
This document provides specific instructions and also designates an agent to make decisions for you if unexpected events make you unable to do so. The living will outlines certain wishes, and the health care proxy appoints an agent to carry out the wishes. This person should not be a close friend or relative, but someone who you feel will be objective enough to “pull the plug” should that time arise. The best person to choose as your agent is your physician.

Didn’t find what you were looking for in Money Guide:Estate Planning? Send us an email at info@moneymovement.org and one of our experts will get back to you.



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