Estate planning is one of those topics that most people avoid at all costs. It ranks right up there with getting a root canal in terms of things to look forward to. I’m here to tell you that a) it’s really not that bad and b) the pandemic is a great reminder to review things you never thought you’d need (except in the worst case scenario, which looks an awful lot like present day).
First and foremost, I want to define what estate planning is. Much of the time, when I bring up the topic, a client says “Oh I don’t have enough money to worry about estate planning” or even “I don’t have any dependents so it doesn’t make any difference.” Both of these responses are based on a fundamental misunderstanding of the term estate planning. Essentially, it refers to a series of documents and directives that tell the world how you want your affairs managed; but the kicker is that many of these apply while you are still alive. In fact, the two documents I encourage all unmarried adults to get above all others is a health care power of attorney and a living will (aka medical directives).
Imagine you get in a car accident and are unconscious. You’re rushed to the hospital where they determine you need a life-saving (but risky) surgery to survive. Who gets to make the decision if you are unconscious? What happens next? If you are married, your spouse is able to make such a decision on your behalf. But what if your spouse is also in the accident and unable to perform this critical duty? You can see how easily things get complicated. And if you’re unmarried, it can be even worse. Can your parents make the decision? Does your partner have any say in the matter?
As unpleasant as you might think this topic is, I can assure you it is far more unpleasant dealing with an unexpected illness or death when documents have not been drawn up. I’m surely dating myself here, but if you remember the YEARS that Terry Schiavo was on life-support while her family battled about how to proceed, you’ll know how bad it can get when you haven’t clearly stated your wishes. I like to think of estate planning as a gift to your loved ones, which makes it easier for them in a time of extreme stress, to know what you would want.
I plan to write more on the topic in coming months, but a very quick overview of the types of documents you likely need and what they pertain to.
- The will- most people are broadly familiar with what this document does. It tells people what happens to your assets if you pass away. This includes everything from your home to your bank account and even your pet(s). Perhaps most importantly for anyone with children, this is the document where you name a guardian for any minor children, should you and your spouse both pass away. If you do not have a guardian named, the courts will decide for you (this rarely leads to the best outcome). One important note here: 401(k), IRA and other retirement accounts as well as life insurance pass by beneficiary designation not through the will.
- Powers of attorney (POAs)- as mentioned above, you may name an “agent” who can make health care and/or financial decisions on your behalf. You may have one person designated to be a health care POA and another person as your financial POA.
- Medical directives/living will- this is a document that states types of medical treatments or interventions that you do/do not want. For instance, a common one is to say you do not want to be placed on life support.
The current global pandemic is a very timely reminder to confirm that you have some of these basic documents in place. If you’ve already completed some or all of the above, how long has it been since you reviewed them? If your health care POA has since moved to Australia, they probably need to be replaced with someone local (if possible). I also recommend reviewing beneficiary designations periodically to ensure they still align with your wishes.
My goal with this topic is for all of us to start to have these conversations and normalize the process. While talking about worst-case scenarios can be a bit morbid, the sense of relief you get once you’ve gotten these things in place is hard to quantify. My top takeaway for readers: if you have minor children get something in place for guardianship ASAP. You can always revise or fine-tune later but this is one you don’t want to wait on. If you are single (or not!), I strongly recommend getting a health care POA/living will in place. Don’t let the perfect be the enemy of the good. You’ll sleep better at night knowing you’ve made a step in the right direction.