Ask the Expert: Get Your Whole House in Order
There’s little enjoyment in estate planning. But there’s no better way to protect your family
You know that feeling you have after sorting out your messiest closet?
It was no fun to tackle, but you’re glad you did; what a relief to know where everything is. Estate planning works sort of the same way—but with much higher stakes, of course.
Having your estate in order is essential to protect your loved ones from potential legal and tax issues when you are no longer in charge.
According to the Federal Citizen Information Center the primary legal issues of estate planning involve probate for a will, powers of attorney, and advanced directives.
A will is a legal document designating the transfer of your property and assets after you die. If you die without a will—a situation known as intestate—the court steps in and distributes your property according to the laws of your state, which may or may not coincide with your wishes. If you have no apparent heirs and die without a will, it’s even possible the state will claim your estate.
During probate, which means to “prove” a will, the court determines that your signed will is a genuine statement of how your estate should be distributed. Depending upon the state in which you reside, the probate process may take a few days or many months, and depending upon the complexity of the will, it can be an expensive process.
To be valid, a will must comply with the laws of your state of residence. Only about half the states recognize “homemade” wills. State law may stipulate that you use specific language, sign the will in a particular way, and/or have a certain number of witnesses of a certain age present when you sign.
Powers of Attorney
A power of attorney is a legal document allowing one person (the principal) to appoint someone else—called the agent or attorney-in-fact—to act on his or her behalf. The powers that can be exercised by the agent can be broad or narrow; the principal stipulates them in advance.
If you become incapacitated and do not have a power of attorney, your family may face lengthy and expensive legal action so that someone can act on your behalf.
Good planning dictates that you have two powers of attorney—one for financial matters, and another to deal with medical issues.
Advance directives tell your doctors what kind of treatment you’ll accept if you are unable to make medical decisions. They can take many forms, and laws about them vary from state to state. Federal law requires hospitals, nursing homes, and other institutions that receive Medicare or Medicaid funds to provide written information regarding advance care directives to all patients upon admission.
- Living wills come into effect when a person is terminally ill. A living will does not designate someone to make decisions for you, but it allows you to specify the treatment you want in specific situations.
- A durable power of attorney, or durable medical power of attorney, specifies who will make medical decisions for you. It is activated anytime you are unable to make medical decisions. State laws vary, but most disqualify anyone under 18, your health care provider, or employees of your provider.
For Additional Information
The primary source of legal information is through a qualified estate attorney.
The following Web sites can also be helpful:
http://www.irs.gov/ Internal Revenue Service Web site has up-to-date state tax information.
http://www.abanet.org/ American Bar Association Web site offers information on finding and using an estate attorney.
www.csrees.usda.gov/fsll Online learning to help you achieve financial security for yourself and your family.
http://www.mymoney.gov/ The Federal Government’s Web site dedicated to helping Americans understand more about their money.
http://www.nolo.com/ Legal information and self-help legal books.