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The Financial Guys

What Is Estate Planning and 4 Reasons Why It’s Important

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Estate Planning – a phrase we hear often, but what does it entail? Do not let the word “estate” scare you. An estate, simply put, is the money and property owned by a person. This term is especially used around one’s time of death. When we talk about estate ‘planning’, the idea is to ensure that you and your assets are protected at your time of death. The documents associated with an estate plan are legally binding and identify who can make decisions on your behalf and who inherits your assets upon your death. If you are new to this process, consider completing the four corners of your estate foundation to get started.

Corner 1: Durable Power of Attorney
This document allows someone to act on your behalf in a legal and financial capacity. The “durable” aspect ensures that the document is valid even if you were to be incapacitated. Take for example, you are in the hospital and unable to go to the bank or speak with your financial advisor due to your condition. Your named agent would be able to call on your behalf if a Durable Power Attorney were in place.

Corner 2: Health Care Proxy
This document allows someone make medical decisions on your behalf should you become incapacitated. Many people have a basic version of the form completed (often given to you by your doctor ahead of a surgery or procedure). The Proxy identifies the person who will make any and all health care decisions on your behalf, including potential end of life decisions. It is important to have the document filled out completely and properly witnessed, naming both a primary proxy and an alternate.

Corner 3: Living Will
While the Health Care Proxy names the person who will make health care decisions for you, the Living Will provides guidance to your proxy, outlining whether or not you want life sustaining treatment if you have suffered permanent loss of mental capacity and your body is failing.

Corner 4: Will
A will is extremely important, as it decides what happens to your assets once you pass. If you do not have a Will, your assets will be distributed according to the state laws of intestacy rather than according to your wishes. A will also allows you to name an executor to distribute your estate as well as guardians for minor children. It is a very specific document that must be properly executed and witnessed in order to be valid.

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