6 Essentials of Estate Planning, Part 2: Beneficiary Designations, Healthcare Power of Attorney, and
Part 1 discussed wills/trusts, durable power of attorney, and letters of intent. This part will focus on the basics of the last 3 essential items (beneficiary designations, healthcare power of attorney, and guardianship designations).
Beneficiary designations determine where any assets (e.g. 401(k), insurance) not mentioned or dictated in the will, will go. It is important to maintain a beneficiary and a contingent beneficiary on such accounts or plans. If a beneficiary is not named, deceased, or otherwise unable to serve as a beneficiary, a court may be left with the responsibility of determining the fate of the principal’s funds. It is also important to remember that beneficiaries must, generally, be over the age of 21 and mentally competent.
A healthcare power of attorney is different from a durable power of attorney in that it only gives the designated individual the power to make medical or healthcare decisions on the principal’s behalf, when they are incapacitated. A durable power of attorney gives the designated individual the power to make legal, not healthcare decisions, on the principal’s behalf. When deciding who will be chosen for such designation, it is good form to choose an addition, “back-up”, individual incase the original designee is unavailable.
Guardianship designations are often incorporated into most wills/trusts. The designation ensures that any children the principal has, or may have, will be adequately taken care of. Picking an individual(s) for such a designation is very important, after all they may be raising your children. When choosing the individual make sure they are willing to take on such a responsibility and that they have the means to carry out such a responsibility. Again, choosing a back-up is important incase the original designee is unavailable.
In conclusion, a will/trust is a great place to start; but there is much more to be done to ensure a successful estate plan has been created. Estate planning is a complicated process; the help of estate planning professionals is encouraged.