What is an Estate Plan?
Welcome to Buck Law's Legal Blog! It is our hope to continuously bring our followers helpful information as it relates to business law and estate planning topics. The goal here is to break down those difficult legal concepts without the textbook explanations that no one has time for!
So let's get to it!
Not only are we nearing the end of the year, but we are also days away from completing another decade! Wow! With the prospect of so much possibility and growth in 2020, I'm here to remind you of another thing that should be on your radar: estate planning.
Before you think of your excuses as to why you don't need one, I implore you to keep reading this blog each week, and then decide for yourself. (Spoiler Alert: you need an estate plan).
For this first post, let’s take a 10,000 foot view of the estate plan.
An estate plan is planning, while you are alive, for things like: how your property, assets and wealth will be transferred after you die, and who will have authority to make financial and medical decisions on your behalf if you can't. The foundation of a simple estate plan includes four legal documents that each serve a very specific purpose. They include:
1. Durable Power of Attorney
2. Medical Power of Attorney
3. Last Will and Testament
4. Living Will
Let's break each of these down into a few sentences. In later posts, I will take a more in-depth view into each.
Durable Power of Attorney
The name may be confusing, but in essence, this is your Financial Power of Attorney. This document grants a named individual(s) the authority to act on your behalf with respect to your financial and business matters if you become incapacitated or face unforeseen personal circumstances and cannot oversee your financial affairs. This person is called an agent.
Your financial power of attorney is important for two primary reasons.
1. With this document, your agent has the power to oversee your financial dealings. Power granted to your agent could include: filing your taxes, signing checks, managing your investment accounts or acquiring and selling property, among other powers. A trusted agent can immediately step in and handle your financial affairs if you are not able.
2. The consequence of not having this document in place? When you become incapacitated, it will be necessary for the court to appoint a person(s) to handle your affairs for you. This takes time, money and most importantly, it takes the decision away from you to choose your agent.
Medical Power of Attorney
Although similar in the sense that you are granting another person the authority to make decisions on your behalf if you cannot, the Medical Power of Attorney allows you to appoint an agent to make medical decisions for you. Simply put, this person stands in your shoes and tells the doctors what to do or not to do in regards to your medical needs. This may be needed temporarily, for instance when you are under anesthesia, or for navigating long-term health needs of the individual.
This document is separate from the DPOA because it authorizes different powers to the agent. Moreover, the reality of the situation is that the person you choose as your Medical Power of Attorney must be able to make difficult decisions, even ones that end medical care. Often times, your two powers of attorney are different people.
Last Will and Testament
Your will is the document whereby you decide how, and in what manner, certain property owned by you will be distributed at your death. Wills can be of various degrees of complexity and can be utilized to achieve a wide range of family and tax objectives. If a will provides for outright distribution of assets, it is sometimes referred to as a simple will. Wills can also create one or more trusts at your death or "pour-over" your probate assets into a preexisting revocable living trust. The beauty of a will is the flexibility to achieve your particular goal.
Why is your will important?
1. If you die intestate (without a will), Colorado statutes determine how your property and assets will be distributed. Yikes!
2. You may choose to provide for persons whom Colorado's intestacy laws would not otherwise benefit, such as stepchildren, godchildren, friends or charities.
3. You can designate a guardian for your minor children and thereby minimize court involvement in the care of your child.
4. You can designate your personal representative (executor) of the estate of your will.
Again, here is another confusing name. Your living will is not really a will at all. Your living will, also referred to as an Advanced Medical Directive, is the legal document that tells your doctor what type of life sustaining procedures you want and do not want. This is the document where you can declare whether life-sustaining procedures will be withheld or withdrawn, for example Do Not Resuscitate (DNR) or end of life nutrition and hydration.
Why is your Living Will important?
1. Keep the power in your hands by deciding in advance the care that you wish to receive (or not to receive).
2. Relieve the burden of your family members having to make difficult decisions during a very sad and confusing time.
3. Delegate the decision by taking away the power of the state to appoint someone close to you to be your decision-maker, and instead, you decide on the major decisions ahead of time so your family doesn't have to.
Estate plans are complicated. As we just touch the surface of the Durable Power of Attorney, Medical Power of Attorney, Last Will and Testament and Living Will documents, it is helpful to understand that each family situation in all its uniqueness could benefit from planning ahead. If you have questions, send me a message on Instagram (@buck.law) or on Facebook (@bucklawoffice)