Proper estate planning can spare heirs financial woes
Financial planner explains the basic documents necessary to ensure peace of mind
By Peter Kozak Special to The Acorn

Most Americans are not following through on the often repeated recommendation to "get their estate plans in order," concludes a recent survey conducted by Harris Interactive for Lawyers.com.

Yet 18 percent of Americans have directly experienced problems after the death or incapacitation of a loved one who didn't have a properly prepared estate plan.

The statistics are rather startling: 58 percent of Americans lack a basic will and only 27 percent have current powers of attorney for health care or finances. Worse yet, only 31 percent of the individuals surveyed nationwide have a "living will" or medical directive.

Without such documents, our surviving loved ones can be left with unnecessary heartache, confusion and financial hardship.

In addition, the costs of settling an estate when someone dies without an estate plan are much higher than the costs of preparing the estate planning documents.

Among those surveyed who did have an estate plan, 25 percent said their biggest motivation for creating the estate plan was the arrival of children. The issues of guardianship for minor children are critical for families to plan.

For example, if you can no longer raise your children, who should and how? Estate planning documents are essential for anyone with children. Interestingly, only 7 percent of those surveyed found that marriage was motivation enough to create an estate plan.

The basic components of an estate plan include a will, possibly one or more trust documents, powers of attorney and medical directives.

Depending on your circumstances and goals, there are numerous other documents which could also be included in your estate plan. The wills and trusts work together to ensure that your assets are distributed to your heirs at the time and in the manner you want.

The powers of attorney allow for bill paying, financial and healthcare decisions to be made by a trusted relative or friend in case you are incapacitated. Medial directives document how you wish to handle your end of life care in the event of medical incapacity.

Once you worked with an estate attorney to create the estate documents, it is important to regularly review the documents to ensure they still reflect your goals and wishes.

Estate planning is a process- not a one time event. Not only do the laws constantly change, but personal relationships and circumstances also can change. This generally requires the estate documents to be updated to note the names of new beneficiaries or personal representatives, among other possible changes.

As children are born, the estate documents should be updated along with the beneficiary designations on both life insurance and retirement accounts such as 401(k)s and IRAs. It is important to keep the beneficiary designations up-to-date for the retirement plans because the beneficiary designation controls the eventual disposition of these accounts regardless of the language in the will or trust.

Many estate plans include charitable provisions. In addition to loved ones, there may be organizations we wish to benefit from the fruits of our lives.

If so, we need to update our estate documents when we make any changes to your list of charities or fund charitable remainder trusts or other types of planned giving vehicles.

It is not too soon to make an early New Year's resolution to meet with a qualified estate planning attorney and either draft your first estate plan or review the plan you already have in place. A current estate plan is perhaps the last best gift you can leave your loved ones.

Peter Kozak, a certified financial planner with a financial advisory practice in Camarillo, is a member of the steering committee for St. John's Healthcare Foundation Gift and Estate Planning Symposium. He can be reached at (805) 764-0335.