Kickstart Your 2021
Happy 2021! Like most of us, I'm sure you are more than glad to be leaving 2020 behind. But while you wave goodbye to the past, it's also a great idea to start preparing for the future. And one way that you can get 2021 off to a great start is by getting your estate in order.
If 2020 showed us anything, it's that you need to be prepared for virtually anything. From pandemics to politics to social polarization, things are far more fragile than we often like to admit. Fortunately, you can mitigate a lot of risks (and gain a ton of peace of mind) with some basic estate planning.
If you aren’t familiar with the term, estate planning refers to a set of instructions detailing how you’d like your finances and affairs to be dealt with should something happen to you. Typically, plans include a Healthcare Power of Attorney, a HIPPA Authorization, a Will and/or Trust, and a General Durable Power of Attorney.
Now, it's likely that you've heard of a "Will" before, but some of these other terms might be unfamiliar to you. In the interest of making sure you have all the right information, I'll take some time to define each term in detail.
First, you have the Power of Attorney. This is a document through which you appoint a person to act on your behalf. This "agent” is then bestowed with all the authority and power you yourself would wield. For instance, a General Durable Power of Attorney is appointed in your absence to make financial decisions regarding your assets and funds.
If the power is granted immediately, your agent can make decisions regardless of your condition. However, you can also set up a “springing” POA in which the agent only assumes power after you are incapacitated. Lastly, you have a "durable" Power of Attorney. This is a situation in which the agent's power continues in spite of you having incapacity. All are suitable options, but there are pros and cons to each.
Next, you have the Healthcare Power of Attorney. This is a document through which you appoint an agent to make medical decisions for you in the event you cannot do so yourself. This is commonly associated with comas and conditions in which an individual's judgment is somehow severely impaired. The next document to consider is the HIPAA Authorization. This appoints an Agent who can access confidential health information to aid in making medical decisions.
It's worth noting that all of the agents you designate under your Powers of Attorney should be updated regularly. After all, your relationships with others can change dramatically throughout your life, and you don't want to have the wrong person in charge while you are incapacitated.
Though most people are familiar with Wills, not everyone is entirely aware of how they work. For instance, in the absence of a Will, all assets in your name will be distributed as determined by the intestacy laws of your state. This is not always ideal. Fortunately, with a Will, you can easily determine to whom you would like to bequeath which assets. It also allows you to designate someone to handle your estate after you pass and nominate guardians for any children you might leave behind.
Of course, this process can sometimes be both lengthy and costly. This is due to the fact that both are subject to a public probate proceeding. To avoid this process and maximize your family's privacy, you can also choose to set up a Trust. This is a private account into which you can transfer your assets over your lifetime. In the event you pass on, the trustee you designate can access the trust on your behalf. As an added benefit, the institution holding your trust will often recognize that trustee's power before the person with Power of Attorney, which can help prevent fraud.
Though we're yet to see just what 2021 has in store for us, estate planning is something that we should all add to our yearly "to do" list. In the end, it will be well worth the peace of mind that comes from knowing your family and your assets will be in the proper hands should anything happen.