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Estate Planning: The Three Most Important Documents You Need

Posted by Tammie Yearwood on Thu, Feb 16, 2017

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Estate Planning: The Three Most Important Documents You NeedEstablishing an estate plan is one of the most important steps you can take to protect yourself and your loved ones. In addition to saving taxes, it’s essential to ensure your assets will be distributed according to your wishes.

In many instances, people spend more time planning a family vacation than they do planning their estates. They look at estate planning as a burden instead of an opportunity. You’ve worked hard your whole life to provide for your family and make your loved ones more secure, so be sure to have an estate plan.

Proper estate planning not only puts you in control of your assets, it can also spare your loved ones the expense, delay, and frustration associated with managing your affairs after you are no longer here or unable to do so if you become incapacitated.

Important estate planning documents to have include wills, durable power of attorneys or medical directives. If individuals do have these documents, they may not have looked at them recently to see if they need to be updated.

"Why Should I Have a Will?"

For those that do not have a will, one may ask “Why should I have a will?” A will is important because if you do not designate who will inherit your property, a state statute will. The statutory distribution scheme (known as “intestate distribution”) will often provide for results differing from your wishes.

If you have property in several states, the rules in each state may be different concerning who will be entitled to your properties. Typically, intestate law divides the decedent's estate between the surviving spouse and living children; however, many people are surprised by the actual division made by state law. Even if the decedent does not have children, the spouse generally will not inherit the entire estate. In Pennsylvania, if your spouse and parents survive you, your estate will be divided between both your spouse and your parents.

estate planning questionnairePerhaps most importantly, a will gives you the opportunity to designate a guardian for your children if your spouse does not survive you. You have better understanding than a court as to which of your relatives or friends will best be able to care for your children, both emotionally and financially. Your will can put this designation in place, identifying the best person for each type of function.

READ MORE: Estate Planning: 10 Reasons to Plan for Your Family’s Future

A will can also simplify the probate process for your survivors. For example, you can designate a personal representative (also known as an executor) to handle the transfer of properties in your estate. You can direct how your assets (including a family business) will be distributed and make specific bequests to individuals and organizations. There can also be the benefit of estate tax savings through your will.

For those that do have a will, one may ask “Why does my will need to be updated?” Over time there could be a change in your family such as a divorce, birth or adoption of child, death of a designated beneficiary or perhaps a beneficiary may become disabled. You want to make sure that your will provides for everyone according to your intentions.

Other Crucial Documents

In addition to a will, you should be sure to have a “living will” (i.e. Advanced Directive for Health Care, Durable Power of Attorney, or Health Care Proxy). This document will appoint a health care representative to make medical decisions and give them access to your medical records. This document can also specify your end-or-life medical care decisions which relieves your family of making burdensome decisions at an already confusing and difficult time. It is important to clearly state if you would want treatment to extend your life in any situation or only if a cure is possible or perhaps not at all.

Lastly, you should also have a general durable Power of Attorney. This document appoints an individual (i.e. agent) to represent you during your lifetime for various items including financial matters, banking transactions, real estate transactions, executing contracts, making gifts, signing tax returns, applying for governmental benefits, access to safe deposit box and many other items that could be specifically identified in the power of attorney.

Because you need to be of sound mind to appoint someone as your power of attorney, it is best to have this document executed sooner than later. Without this document, your family will need to request a court to appoint someone to act on your behalf which can be very burdensome.

To best meet your intended wishes, it’s necessary to have a Last Will and Testament, Durable Power of Attorney and medical directive, as well as being sure these documents are periodically updated. If you would like more information on these documents or would like assistance preparing them, please contact us.

Our estate planning team is led by Tammie L. Yearwood, CPA, who has more than 17 years of experience in estate planning. Tammie’s areas of specialty are estate, trust and gift tax compliance, including estate and trust planning, fiduciary accounting, estate administration, and individual taxation. She is a CPA in Pennsylvania, New Jersey and New York.

Learn more about Tammie here or contact her at tyearwood@concannonmiller.com

Topics: Estate and Trust Services

Concannon Miller’s unique, holistic and intimate approach to financial health sets us apart from smaller CPA firms with more limited resources as well as mega firms where mid-sized clients struggle for attention. Contact us here to talk about improving your business.

This communication is designed to provide accurate and authoritative information in regard to the subject matter covered at the time it was published. However, the general information herein is not intended to be nor should it be treated as tax, legal, or accounting advice. Additional issues could exist that would affect the tax treatment of a specific transaction and, therefore, taxpayers should seek advice from an independent tax advisor based on their particular circumstances before acting on any information presented. This information is not intended to be nor can it be used by any taxpayer for the purposes of avoiding tax penalties.

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