Getting organized and planning ahead at the beginning of the year through estate planning.
January is the perfect time to get organized and start planning for the year ahead. One area that is often overlooked but is extremely important is estate planning.
Estate planning is the process of organizing and preparing for the management and transition of your assets in the event of your death or incapacitation. It involves creating a plan that ensures your wishes are carried out and that your loved ones are taken care of.
Get to know the documentation involved.
A thoughtful estate plan will include several key documents including a will, a power of attorney, and an advance directive or medical power of attorney. A will is the legal document that outlines how you want your assets to be distributed after you die. A power of attorney gives someone the authority to make financial and legal decisions on your behalf if you are unable to do so. An advanced directive or medical power of attorney is a document that outlines your wishes for medical treatment if you are unable to make those decisions yourself (read more about the differences between advance directives, medical power of attorneys, and living wills HERE .
In addition to these documents, you may also want to consider creating a prenuptial agreement or co-habitation agreement if you are in an unmarried relationship. If you are planning on getting married, a prenuptial agreement is a legally binding contract that outlines how assets will be divided in the event of a divorce. A co-habitation agreement is similar, but it applies to couples who are not married. A co-habitation agreement is a great choice for couples who purchase real property together. These agreements can help protect both parties and ensure that everyone is on the same page when it comes to financial matters.
To create a new estate plan or to update your old one, the first thing you need to do is create a list of all your assets and debts.
To create a new estate plan or to update your old one, the first thing you need to do is create a list of all your assets and debts. This includes bank accounts, real estate, personal property, investments, retirement accounts, life insurance policies, and/or loans that you have made to family or friends that need to be repaid. Make sure to include important household items and collections. Next, list out every debt you have: mortgages on houses, loans for cars, credit card balances, student loans, and loans from family or friends. Deduct the total amount of your debts from your assets, and this is the total amount you have to distribute through your estate plan.
Making a list of your assets and debts helps you to understand what assets you have to distribute on your death.
If you have minor children, decide who you would like to take custody if your children cannot be with their other parent.
In Oregon and Washington, children are considered minors until they turn eighteen. If you have minor children, even a child who is 16 or 17, decide who you would like to take custody of them if the child cannot be with their other parent. The person you choose must be responsible and have a good relationship with the child. It is also important that this person can provide for the child’s needs and has enough time to spend with them. If possible, pick a close friend or family member who has been active in your child’s life.
If you are married and in a blended family, meaning both spouses have children from a prior relationship, consider how each side of the family will be treated when one spouse dies.
If you are in a marriage and both you and your spouse have children from a prior relationship, this is considered a blended family. In Oregon and Washington, if you do not have a will then a portion of your estate will pass by state law to your spouse and a portion of your estate will pass by state law to your children; step-children do not have a right to inherit from a step-parent. Making a plan in advance avoids hurt feelings and accidentally excluding people.
No estate plan is the same. Some people want to leave everything to their spouse and include provisions in both estate plans that on the second person’s death all assets will be divided between the children of both parents. Other people decide to carve out a gift to pass automatically on their death to his or her children, with the remainder passing to their spouse. Others have a prenuptial agreement in place and intentionally avoid the surviving spouse because both parties have brought significant assets to the marriage.
Making a plan in advance guarantees that everyone is in agreement prior to a person’s death.
Review your beneficiary designations for your retirement accounts and insurance policies.
The start of the year is a good time to review beneficiary designations for your retirement accounts, insurance policies, and investments. Many people haven’t looked at the beneficiary designations in years and are surprised to learn that a family member, such as a parent, is the named beneficiary. Make sure you have designated the right beneficiaries on all assets with beneficiary designations. Remember: beneficiary designations operate separately from your will, so even if your will says one thing, the asset will pass to whoever is listed on the beneficiary designation.
Make sure someone has access to all of your accounts and can pay bills on your behalf if you are incapacitated.
If you become incapacitated, who can make financial decisions on your behalf? How will your rent, mortgage, and utilities be paid? The answers to these questions are important. Without a valid power of attorney in place, your family will have to seek a court appointed guardian and/or conservator to manage your assets if you become incapacitated.
Naming someone to make medical decisions on your behalf if you cannot make them yourself is just as important as choosing an executor of the estate.
Naming someone to make medical decisions on your behalf if you cannot make them yourself is just as important as choosing an executor of the estate.
Consider:
- Who is the right person? They should be someone you trust and respect who is likely to put your wishes first.
- Does this person have a good understanding of your health needs, both obvious and not so obvious?
- What kind of personality does this person have? Would they be willing to initiate difficult conversations with doctors or other caregivers if they believe it will help preserve your quality of life?
- Is this person available to do what needs doing when it needs doing (and not just on a whim)?
Having an advance directive or medical power of attorney is especially important if you are an unmarried couple. Without such a document, you will not be able to advocate for one another in a medical emergency.
Do not let fear or uncertainty stop you from completing this important task. An experienced attorney can help guide you through the process.
Once you’ve determined that estate planning is the best option for you, do not let fear or uncertainty stop you from completing this important task. At Kehoe Moneyhun Law we help guide you through the process and make sure that your wishes are carried out.
Estate planning is extremely important, but many people put off doing this task because they keep putting it off until tomorrow. Instead, think about how happy you will feel when this task is completed!
Estate planning is extremely important, but many people put off doing this task because they keep putting it off until tomorrow. Instead, think about how happy you will feel when this task is completed! We find that many clients feel a sense of relief at having completed their estate plan.
Getting organized and planning ahead can seem overwhelming, but it is an important step to take to ensure that your wishes are carried out and that your loved ones are taken care of. If you have not already done so, consider taking the time to create an estate plan and consider whether a prenuptial or co-habitation agreement is right for you. At Kehoe Moneyhun Law we aim to assist you through the entire process with kindness and compassion. For more information, schedule an appointment with one of our attorneys HERE.
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