The Estate Planning Essentials

By: AnnaMarie Mock, CFP®

As a financial planner, I like to be as prepared as possible for the unknowns in life. This allows me to have peace-of-mind knowing that major issues have already been addressed. As life evolves, no one can be certain about the future, but one aspect you can control is your legacy through a comprehensive estate plan. A comprehensive estate plan can be comprised of a variety of documents, but the base estate plan should include a last will and testament, durable power of attorney, and medical power of attorney and directive. These documents guide your appointed agent(s) to ensure your medical and financial wishes are taken care of and your financial legacy passes in accordance with the guidelines laid out as smoothly as possible. Having an estate plan in place prior to a life changing event, cognitive issues, or death can help ensure that the decisions made by the individual are honored.

Last Will and Testament:
The last will and testament is a legal document that captures and outlines the disposition of an individual’s possessions and assets. A will appoints an executor to act on behalf of the decedent to administer the estate through the probate process. A will is the foundation of an estate plan in that it identifies how the decedent’s assets will be divided, including the recipient(s) and amount(s). However, some assets will not be directed by the will but will be based on the beneficiary designations listed on the account. Accounts like qualified retirement accounts, individual retirement accounts (i.e. IRAs), employer retirement accounts (i.e. 401(k)s), and life insurance are all directed based on beneficiary designations. The will should be written in a consistent manner with the assets that pass outside of the will.

The will, also, establishes guardian arrangements for any surviving dependents, including the care of special needs children or aging parents. In the event that the decedent died intestate (died without a will), and there is no living spouse, the court will name a person to act as the guardian and a conservator to manage the child’s financial affairs until they reach age of majority. A court appointed guardian/ conservator may not be an appropriate option, as they may not be able to tailor their care to the needs of the dependent. In addition, it may take months for guardianship to be granted.

Power of Attorney:
A power of attorney (POA) names an agent or attorney-in-fact to act on your behalf during your life. The agent can have broad or limited authority to make financial decisions. A conventional POA will lapse when the creator is incapacitated, but durable POAs will remain in force and enables the agent to continue to manage the affairs. A springing POA is valid only when the creator becomes incapacitated. For any long-term care scenarios, a durable power of attorney (DPOA) provides control to the agent for making financial decisions like handling bank accounts, signing checks, selling property/assets, paying bills, and filing taxes.

Health Care Directive & Power of Attorney:
Similar to a financial POA, a medical power of attorney appoints an agent to speak on your behalf for medical related decisions when you do not have the capacity to do so. The medical POA can take affect for short time periods or for a longer health crisis.

A Medical Power of Attorney allows the health care agent to readily access medical records and make decisions related to your healthcare. These decisions could include medical and surgical treatments, hospitalization, home health care, and prolonging interventions. The medical power of attorney should specifically incorporate the HIPAA release provisions and identify the agent as the personal representative. Coupled with the Medical Power of Attorney, you should, also, get a Health Care Medical Directive, which allows you to express your desires related to end of life care.

There is particular language that has to be included in Medical Power of Attorney documents based on Health Insurance Portability and Accountability Act (HIPAA) updated in 2004. Please refer to an earlier article that goes in depth on Medical Power of Attorney documents.

Everyone’s situation is different and determining the right strategy to fit your needs is the first step. A comprehensive estate plan maximizes the value of your assets for the benefit of your loved ones. Estate planning is designed to help plan ahead for important decisions that may arise in the future. Everyone’s situation is different but determining the right strategy to fit your needs is the first step in proper planning. If you have any questions, please do not hesitate to reach out to your HIGHLAND team.

Author’s Bio
AnnaMarie Mock is a CERTIFIED FINANCIAL PLANNER™ at HIGHLAND Financial Advisors, LLC based out of Wayne, NJ. HIGHLAND Financial Advisors, LLC is a Fee-Only financial planning firm that offers comprehensive financial planning, retirement planning, employer retirement planning, and investment management to help clients focus on what matters most to them.

AnnaMarie graduated from Montclair State University with a degree in finance and management and successfully passed the CFP® national exam in 2016. She has been working at Highland Financial Advisors since 2013 as a financial planner and is involved with Upswing Advisor, a platform dedicated toward creating a solid financial foundation for young professionals. AnnaMarie is a member NAPFA and the XY Planning Network.