By: 29 October 2020

Whether you have been with PrairieView for a few months or 10 years, you probably know we take a comprehensive approach.  We look at your whole financial picture —investments, tax, education funding, insurance, executive compensation, etc.—and utilize that bird’s eye view to help you make great decisions within each individual area.  Part of that comprehensive picture is Estate Planning.

This blog post touches on some of the important Estate Planning documents that can help fulfill your financial and personal wishes during life and after death.

1. Last Will and Testament

Otherwise known as a Will, this document details how your assets will pass upon death. Who should inherit your investment accounts?  Should part of it go to charity?  As one of my favorite Clint Eastwood movies depicted, who should get the 1972 Ford Gran Torino?  A Will answers questions like these. 

Additionally, a Will names a Personal Representative—the person who divvies up your assets according to your wishes—and, if applicable, Guardian(s) to take care of your children.  Ensure persons selected for these positions are trustworthy and would carry out your wishes in a way in which you would be happy.

2. Beneficiaries

The simplest way to transfer investment assets, life insurance, pension income, etc. is through beneficiaries.  A little-known fact is that a beneficiary designation supersedes a Will.  For example, if you list Dave as the primary beneficiary on your 401(k), but your Will leaves everything to Matthew, the 401(k) money would go to Dave.

It is worth mentioning, investment accounts and life insurance should have primary and contingent beneficiaries.

3. Power of Attorney (or Financial Power of Attorney)

Ever wonder who would make financial and legal decisions for you if you were to become mentally incapacitated?  I sure did not for the first 25 years of life.

This person is called the Agent or Attorney-in-Fact.  Through a Power of Attorney, he/she can invest and sell assets, manage real estate, and pay bills on your behalf.  Interestingly, in MN, this form is effective immediately, even if you are not incapacitated.  Some states allow a Power of Attorney that “springs” into action only if you become incapacitated.

The Power of Attorney ends upon the incapacitated person’s death.

4. Health Care Directive

I do not know about you but thinking about who would make Health Care decisions for me if I were to become incapacitated evokes a more visceral feeling than considering who would pay my US Internet Wi-Fi bill.

The Health Care Directive selects the person who would determine your medical treatment and specifies end-of-life instructions.  Should you undergo surgery?  How much end of life medical care should be given?  This document enables and guides an Agent to answer these questions for you.

5. Revocable Living Trust

Assets held in a Revocable Living Trust do not pass through probate—the legal process of distributing assets and paying off debts.  By avoiding probate, you can fast-track asset distribution.  In MN, this typically takes 6-12 months, but it can stretch years.  Saying that, in many cases Form 706 (Estate Tax Return) must be filed, which can delay distribution.

Other benefits of a Revocable Trust include privacy (probate documents are open to the public) and flexibility (you can change it at any time).  On the flip side, Revocable Trusts can be costly and time intensive to set up (retitling assets).

As the Buddha said, “Everything changes, nothing remains the same.”  While we might be limited in our ability to control these changes, by developing a well thought through Estate Plan, you can strengthen your comprehensive financial plan and live life on your terms.

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