A Simple Explanation of Estate Planning Documents

Estate Planning can be a complex but critically important process to ensure your wishes and that of your loved ones are honored. If you missed the recent webinar presented by Attorney Denise Mortati, here are the highlights!

It’s so important to have the following three estate planning documents:

1. Last Will and Testament

This document is for the distribution of assets from your estate—who will get what? Points to remember: only assets that are in your name alone are distributed through your will (bank accounts, brokerage accounts, property, automobiles, savings bonds, etc.). Joint assets and those accounts that have named beneficiaries (like life insurance policies, IRAs, and other retirement accounts) are not distributed by your will.

Your Executor, whom you have named in your will, handles the distribution of your estate. He/she is responsible for making sure all of your debts and taxes are paid before they make any distribution from your estate. It is a big responsibility, and you should choose someone organized and able to manage paperwork.

A will can also name guardians for your minor children, as well as create “testamentary” trusts for minors who might inherit assets, or for a beneficiary who might have a disability, or for a beneficiary who may have creditor issues, or be otherwise unable to manage their money (drug, alcohol issues/addiction, for example).

If you die without a will, you should consider that the distribution of your estate may not happen the way you want it to. In your will, you can be specific about your beneficiaries’ inheritances. Without a will in place, the Court follows Connecticut law concerning how assets are distributed.

Notes about accounts: 

Check beneficiaries on all of your retirement accounts, IRAs, life insurance policies to make certain that they are updated and reflect your wishes. Because these accounts fall outside of probate, if they have a beneficiary, you should keep the beneficiaries up to date.

2. Durable Power of Attorney

A Power of Attorney is authorized to act on someone else’s behalf in a legal or business matter. A Durable Power of Attorney allows this authorization to continue past the point of incapacity. This is very important, as the most frequent use of a Power of Attorney takes place after incapacity when it is no longer possible for a person to act on their own. A Durable Power of Attorney is effective immediately. Two people can act as POA, to act as co-agents, if you wish. 

However, you have a choice of whether you will allow them to act “severally”—meaning that they can act independently of one another, or “jointly”—meaning that both have to act together.

Some of the powers included in a POA are: the power to deal with real estate (including putting a home on the market, accepting an offer, signing closing documents, etc.); bill paying, and working with banks; working with other financial institutions, including financial advisors, accountants, etc.; dealing with annuities, insurance, stocks/bonds, etc.; handling of claims and lawsuits, or other litigation; dealing with benefits and retirement plans; prepare, sign and file tax returns.

Optional powers can also be given to the agent: the power to gift, and to whom, and how much, as well as the ability to make gifts to qualify for state/federal benefits (like Medicaid); the ability to create a special needs trust or a pooled trust (both helpful should you become disabled or incapacitated); create, amend, revoke or terminate a living trust; the power to change beneficiaries.

A POA has a fiduciary obligation to you! Your agent owes you a duty of loyalty. They are to act in your best interests and to act as you would, not as they want. 

They are to act with care and diligence and in good faith. Additionally, they can be responsible and held liable for any abuse or misuse of monies. 

This helps to protect vulnerable people from financial exploitation and to provide a remedy for those that act inappropriately.

3. Advanced Health Care Directive

An advanced health care directive is an estate planning document that should include three items: your end-of-life care wishes; the appointment of a health care agent (and a backup/successor) to make medical decisions on your behalf, when you are no longer able to make your own decisions; and the appointment of a conservator (and back up/successor) if a conservatorship of the person ever needs to be set up through the Probate Court.  

This legal document gives your family (and doctors!) a roadmap about what you want, and it allows you to have control. YOU can list your wishes and YOU can appoint the person you want to make these wishes known! It is better than having your family guess what your wishes are. This avoids arguments among family members as well.

How often do all of these documents need to be updated?

• You should look at your documents every two to three years to make certain it still reflects your wishes. If all are still correct and you do not want any changes, they most likely do not have to be updated.
• You should consider updates if anything changes in your life (a child, spouse, or executor passes away, a divorce, a significant difference in assets).
• You should still update your Power of Attorney every three years or so, as banks and other financial institutions want more up-to-date documents.

To find out more about estate planning documents, contact Denise Mortati today. To learn more about UMH contact us today or schedule a complimentary visit now.