What are Powers of Attorney?

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he two documents we’re discussing in this article are an Advance Health Care Directive and a Durable Power of Attorney. These are two different documents that give someone else the power to make decisions for you. 

An Advance Health Care Directive (AHCD) gives someone else the right to make medical decisions for you. That sounds simple enough, but there are a few difficult questions you have to answer when you develop this document. Who do you trust to make the decisions for you; are you someone who wants anything and everything done to keep you around if you won’t have quality of life, or is there a time where it’s best to stop trying; are you going to be an organ donor; or do you have specific requests around burial or cremation? These may be some very uncomfortable questions to answer, but it’s important to document your wishes on paper so that you give your loved ones some guidance on your wishes. 

A Durable Power of Attorney (DPOA) gives someone else the right to make financial decisions for you. Essentially, it gives them the right to stand in your shoes and sign your name. This power of attorney can be structured in a variety of ways. You can give someone a limited power, say to only take care of your mortgage, and only when you’re incapacitated (called a limited, springing power); or, you can give someone very broad power to do everything you can do, starting right now (called a general, immediate power). What’s right for you depends on your situation, but most people end up with what’s called a general, springing power. That means, the person named can do anything and everything you can do, but only if you’re incapacitated. 

It’s important that you set up both of these documents as part of your estate plan for a couple of reasons. First, it prevents your loved ones from having to go through an expensive and burdensome court process to gain a conservatorship over you if you don’t have these powers set up. Another reason to set these up ahead of time is you’re telling your loved ones exactly what you would want to happen to you in the event you cannot speak for yourself. This lifts the burden off of their shoulders of ever having to second guess decisions they make for you. 

If you need help setting up your powers of attorney, or want to learn what you need as part of your broader estate plan, contact our office today to schedule your free strategy session.

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Why do I need an Estate Plan?

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his is probably one of the bigger questions out there, “Why should I care?”. And while we could write entire textbooks around this subject, let’s boil it down to the three main reasons most people need at least a basic estate plan set up today. Be sure to check out our other articles on Probate, Trusts and Wills to learn even more detail. 

 

Reason #1) You are the parent of a minor child. 

What happens if an unforeseen and unfortunate event occurs, and tomorrow we cannot be here for our children? Who will take them in, care for them, and raise them in a way we would approve of? As the parents of three little girls, we don’t like thinking of this anymore than the next person, but it’s important that we take the time today so that we can set up an estate plan that includes a will. The will is where we nominate a guardian for minor children who will take care of them in the event we are no longer around. Doing this gives you the peace of mind that if something happens to you, the person of your choosing will be nominated to take in your children and raise them. 

 

Reason #2) You want to make sure that you’re cared for and that decisions are made according to your wishes when you can’t speak for yourself.

This goes towards having powers of attorney as part of your estate plan set up now. Doing this helps prevent your loved ones from having to go through an expensive and burdensome court process later down the road to get a conservatorship over you. Perhaps the more important thing is you’re giving your loved ones guidance on what you want to happen in the event you can’t speak for yourself. This relieves your loved ones of the burden of second guessing whether their decisions are what you would have truly wanted. 

 

Reason #3) You want your loved ones to avoid the Probate process. 

There are two big reasons to avoid the Probate process. First, it is extraordinarily expensive compared to any estate plan you could have established while living. Probate fees are a percentage of your total estate and the fees are set by California Probate Code 10810, so most attorneys stick very close to this fee structure. This generally means Probate will be tens-of-thousands of dollars more expensive for your heirs to go through than any estate plan you set up while alive would have cost. See our article on Probate for more details about how quickly these fees add up. 

 

The second big reason you want to avoid Probate is you lose control over how your estate is distributed. A Probate Judge will decide who gets what based on then existing California law. That decision will be whether or not that’s what you would have wanted and whether or not receiving the funds at that time is in the best interest of the beneficiary. For more discussion on this topic, please see our article on Probate for some common examples of Probate pitfalls for heirs.  

If you’d like to learn more about why you need an estate plan as it applies to your unique situation, contact our office today to schedule your free strategy session.

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What is an Estate Plan?

What is an Estate Plan?

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efore we answer that question let’s ask and answer an ever more basic question, “What is an Estate?”. An estate is all of the property that you own in your personal name at the time of your passing. That can consist of personal property like a car, jewelry, or a bank account; or it can be real property like a house, a condominium, or vacant land. Anything that is in your name at the time you pass away is what makes up your estate. 

When we talk about Estate Planning, a large part of the discussion does go towards providing for those types of things, but a full estate plan is so much more than just providing for material assets!

An Estate Plan is really an umbrella term that covers all of the parts and pieces that we put together to protect you and your assets while you’re alive, designate who will take care of you and your children in the event you cannot do it on your own, and ensure that your property passes on to your loved ones exactly how you want it to, and in a way that’s most beneficial to them. 

The basic parts of any estate plan include a Will, Advance Health Care Directive, Durable Power of Attorney, and a Trust, when needed, which in California is quite often. What makes up your estate plan may be a little bit different. It may include items like an assignment of economic rights for a business interest; forming an LLC or Corporation to protect assets not otherwise currently protected; specialized trusts for creditor, tax, or special needs concerns, etc. The important part is, everyone needs an estate plan, but what makes up your individualized estate plan may be a little different than the next persons. 

When we talk about estate planning from a bigger picture, it also includes working with a qualified tax professional and financial advisor now to retain as much value as possible within your estate and take steps to grow the value to the largest amount possible. 

If you’d like to learn what needs to be part of your individualized estate plan based upon your wishes, goals, and financial picture, contact our office today to schedule your free strategy session.

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