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Your Financial Future: Advance estate planning is crucial

4 min read
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Many financial issues have changed recently as we deal with inflation, rising interest rates and a crashing stock market.

One basic area that many people do not adequately address is estate planning. This is a topic that many people are reluctant to discuss. They do not like to deal with death and all of the ramifications that are part of it.

It is important to have prudent planning in place before someone’s passing, and have an effective communication plan. A plan is useless if no one knows it or knows who makes the necessary decisions. There are big changes for many family members both financial and emotional with any death. Income usually goes down and taxes go up. The primary financial decision maker may need to be replaced. Communications and financial education are paramount.

It is important to get your documents in order. These could include a will, trust documents, financial power of attorney and advanced directives/health care power of attorney. It’s also important to organize life insurance, retirement papers and information on other financial assets.

It is equally important to have a plan for family members who are seriously ill or incapacitated. Things can happen very quickly so it might be a good idea to create a grab-and-go package, which lists all medicines, personal information, emergency contacts, legal documents and other such information in an envelope to go to the hospital with the patient. Many people have a contact telephone number in their cellphone that is titled ICE. Medical personal know that this stands for “In Case of Emergency.”

While hospitals will usually listen to the wishes of a spouse, the power of attorney is very important when adult children must make decisions. Have only one primary person designated. There may be a backup person if the primary person cannot be promptly reached. Some people are reconsidering health care directives, because while you may not want to be on a ventilator permanently, some covid patients survived after being placed on one. Ask your attorney if your power of attorney needs to be durable to stay in affect if you become mentally incapacitated.

Make sure you update these legal documents if you move to another state as laws are often different. Some families have major problems if their college-age children get seriously sick. If the child is over 18, the parents should have a signed HIPAA authorization, health care power of attorney and a durable power of attorney. Without these documents, the parents may not be able to help their child.

Make sure key people know where your health insurance paperwork is, and that health savings accounts are funded. Update beneficiaries and include contingent beneficiaries. Things change and if you wanted to include someone new or remove someone, this must be done while you have capacity. A beneficiary’s designation overrides provisions in your will. Remember the changes made by the SECURE Act may call for different asset allocation between your higher- and lower-income beneficiaries because of tax rate differences.

Make sure you communicate your plan to those who need to know and that everything is organized. Don’t forget to include a list of passwords to access your various online accounts. Make sure your family is prepared.

Your Financial Future is written by certified financial planner Gary W. Boatman, MBA and CFP, who also wrote the book, “Your Financial Compass: Safe Passage Through The Turbulent Waters of Taxes, Income Planning and Market Volatility.” If there is an area that you would like to see discussed in the column, send your suggestions to gary@BoatmanWealthManagement.com.

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