As you age, cognitive capacity can decline affecting your ability to manage or make decisions about your financial matters. Without the appropriate plan in place, this can leave you vulnerable to financial abuse. This article will walk through the importance of estate planning, setting up a living trust, power of attorney and medical attorney and what key steps to take with your financial advisor to tackle each one. We are also going to provide a brief overview of long-term care insurance and the benefits and considerations.
An estate plan is something that should not be put off, in the event where something suddenly happens, it is so much easier on everyone involved to have your wishes set forth in a written estate plan. An estate plan is much more than a will, it also may include a trust and powers of attorney for both financial and medical matters.
First off, you will meet with your estate planning attorney, if you do not have one, your financial advisor can typically refer you to one. You also might want to bring in a tax professional. Next, it is time to document your wishes. As a reminder, your estate plan should clearly spell out what you want to have happen to your probate assets and possessions at your death. Without this information clearly stated, the state may make those decisions for you. Your estate plan should include:
Healthcare powers of attorney and healthcare directives
The purpose of this document is to name another person to make healthcare decisions for you when you are unable to do so.
Powers of attorney for finances
The purpose of this document is to give the agent the power to manage your financial life when you are unable to do so.
A will is the most basic estate planning document there is – within a will, you can specify:
- What properties you wish to leave to family, friends, and/or organizations?
- Who you wish to act as guardian for any dependent children?
- What person should act as a personal representative or executor to manage your estate at death, pay debts and taxes and distribute remaining property as you wish?
- Whether you want to cancel any debts owed to you at death.
- How outstanding debts and taxes should be paid?
It is extremely important that within your will you name a personal representative or executor, name beneficiaries to get specific properties, and specify alternative benefits.
A living trust
A trust is a separate legal entity that holds ownership to your assets. Living trusts may be revocable or irrevocable. In revocable trusts the trustor can retain control of the property if they wish and the terms of the trust can be changed or cancelled. An irrevocable living trust on the other hand, may not be changed or terminated after the agreement is executed.
You should also think about who your trustee/co-trustee should be. One option is to select a corporate trustee. A corporate trustee is a bank or trust company that provides professional fiduciary services and can act independently. They have procedures and systems in place to manage property and funds in a fair and consistent manner. Choosing a corporate trustee may reduce conflicts among family members while providing experienced and professional investment administrative management.
Another topic that is often overlooked when planning for the future is long-term care. One option to help preserve your future care is by having long-term care insurance. A long-term care insurance policy helps cover the costs of that care when you have a chronic medical condition, a disability, or a disorder such as Alzheimer’s disease. Most policies will reimburse you for care given in a variety of places such as your home, a nursing home, assisted living facility, or an adult day care center. Long-term care insurance is a large expense that doesn’t necessarily make sense for every household so you should work with your Financial Advisor to see if this is a good option for you.
How Client First Capital Can Help
We hope this summary has helped you understand what you should consider when planning for the future. That said, professional legal counsel is usually warranted as you sort through the details as well. At Client First Capital, creating estate plans and understanding the tax implications is exactly what we do best. We are here to help you with any questions you might have and to create your financial strategy with you. For more information, please feel free to connect with us by sending an email or filling out our contact form.