With the new year approaching, many of us will make New Year’s resolutions. As we have witnessed over the last 20 months, the future is never promised and things are sometimes out of our control, so it is more important than ever to put a plan in place should something happen, regardless of your age.
According to a study by caring.com and YouGov, in 2017, almost half (42%) of all Americans said that they have a Will or another type of estate planning document. In 2020, less than one-third (32%) say they have one or more documents. Of those who do have estate planning documents, a Will is the most common, at 23.9% of respondents. 13% of respondents said that they have a living trust, and just 6.2% have a health care declaration.
Below is a list of the most important estate planning documents you should consider completing in the year ahead:
Last Will and Testament – A last will and testament is a legal document that specifies how a person wants assets distributed upon death. Without a Will, assets will be distributed to heirs. For persons married to someone who had children before the marriage, stepchildren will inherit one-half of the community property without a Will.
Common errors people make with Wills are only having a copy of it rather than the original document and using the term “heirs” instead of “descendants” resulting in rights to siblings or spouses.
Revocable Living Trust – A revocable living trust is a legal document that designates someone, the trustee, to manage assets for the eventual beneficiary, while the Settlor, or individual setting up the trust, is still alive. The Successor Trustee, not the court, makes sure your assets are passed to your loved one(s).
The estate tax law is set to expire in 2025 and married couples can avoid estate tax with a revocable living trust. A common error is failing to title assets in the name of the trust.
Healthcare Declaration – A Healthcare Declaration, also called a Living Will, allows a person to declare the type of care desired at the end of life. Healthcare Declarations avoid family members having to make difficult decisions during what is already a challenging time.
Powers of Attorney – There are two types of Powers of Attorney (POA); one for finances and another for health care (mental health and medical care). These documents name an agent, or person, with the legal authority to help you. If you have a POA in place, you can avoid court involvement for any of your health care needs.
A common mistake often made is declaring a person incapacitated before an agent is named. Once you are found incapacitated, you lose your legal rights to handle your bills and any necessary decisions. Therefore, it’s very important to name an agent while you are still able, or should you just need some help if you fall ill.
Estate planning documents need to be kept in a safe and accessible place. A common error is placing the documents in a safe deposit box which can only be accessible when the bank is opened and perhaps only by you. Consult an estate planning attorney, like the professionals at The Cavanagh Law Firm, to ensure you are executing the documents properly and have all your bases covered. Also, consider amending or making changes to any of these documents as your needs or wishes change. Planning ahead will help ease stress of your loved ones and the burden of having to make such important life decisions during an already difficult time.
Sharon Ravenscroft is a Senior Member at The Cavanagh Law Firm. Her practice involves the preparation of Wills, Trusts and related Estate Planning documents such as powers of attorney for finances and health. Her primary focus is to simplify the challenges related to family assets and estate legal issues. Sharon also helps families, friends and Successor Trustees with Estate and Trust Administration.