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    How basic estate planning protects individuals and legacy: Part 1

    Estate planning can help you protect and care for yourself, your family and your practice.

    Estate planning is not a financial concept for just high-income individuals. These concepts apply to everyone, regardless of age or net worth. These concepts can not only help individuals protect and care for themselves and their families at the time of death, but also during their lifetime.

    There are five key estate planning documents — four of which everyone should have. 

    As part of a basic estate plan, individuals should have a will, a durable power of attorney for financial matters, a health care power of attorney, and a living will. These documents will help you control your assets and health care decisions while you’re living and at death.

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    Some people may add a revocable living trust. The first four documents provide the foundation for any estate plan and help individuals stay in control.

    If you already have these documents, be sure to review them regularly. Life events, such as deaths, births, divorces, marriages, inheritances, or a change in state residency, lead to changes in one’s goals–so these documents should change accordingly.

    It is important to update estate planning documents when moving from one state to another because state laws vary. It is important to make sure that the documents are designed to work well in the state where you live. You also should review these basic documents as changes occur in federal or state estate tax laws.

    Will accomplishes plenty

    Estate documentsA will accomplishes a number of objectives. First, it provides  direction for the distribution of assets to family and other beneficiaries upon death. An attorney can customize its provisions to meet your needs. You appoint a personal representative (known as an “executor” or “executrix”) to account for your assets, liabilities, final expenses, any taxes due, and distribution of remaining assets.

    A will also is the only way to designate a guardian for minor children. Should something happen to you, a judge still must approve this appointment, but at least you have expressed your wishes through this document. If you have minor children, it is wise to include a trust to manage assets for them — at least until they reach age 18. 

    A will must be filed in probate court to be effective. Probate is a judicial process for managing your assets if you become incapacitated and for transferring your assets in an orderly fashion upon death.

    The court oversees payment of liabilities and the distribution of assets. Generally, your executor will need to employ an attorney. Since a will does not take effect until death, it cannot provide for management of your assets if you become incapacitated.

    Durable power of attorney

    This is the reason why you also want to have a durable power of attorney. This document lets you name another trusted person to manage your financial and business affairs during your lifetime, if you are unable. 

    A general durable power of attorney allows your agent to perform all duties you typically perform, whereas a limited durable power of attorney covers only specific events, such as selling property or investing assets.

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    Your agent should act in your best interest with financial and business affairs, maintain accurate records, keep your property separate from his or hers, and avoid conflicts of interest. This person will be able to sell, invest, and spend your assets. It becomes imperative to select someone you trust.

    You can give this power to that person immediately, or your attorney can write in a “trigger” that prompts that person to take over for you (such as being designated incapacitated by one or two physicians, as specified in the document).

    Which is better? There’s no right or wrong answer. Discuss with your family and your attorney what might be suitable for your situation. 

    If possible, it is wise to name both a primary and a back-up (a contingent) agent. This will be helpful if the primary agent predeceases you.

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    John Grande, CFP
    John J., John S, and Traudy F. Grande, CFPs, are the editors of the Money Matters column. They are owners and principals of Grande ...
    Traudy F. Grande, CFP
    John J., John S, and Traudy F. Grande, CFPs, are the editors of the Money Matters column. They are owners and principals of Grande ...
    John S. Grande, CFP
    John J., John S, and Traudy F. Grande, CFPs, are the editors of the Money Matters column. They are owners and principals of Grande ...


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