One of the most common estate planning mistakes involves relying solely on one document such as a Power of Attorney or Last Will & Testament.
A Last Will & Testament is an important document every person needs, but it cannot handle the full range of situations that should be managed by a comprehensive estate plan.
A will solely dictates what happens to assets after you die. It does not give directions on medical care you would like administered or withheld, nor place restrictions on what your assets can be used for.
To accomplish these goals a person would need an Advanced Healthcare Directive, a Power of Attorney, or one of several types of trust, depending on the purpose, respectively.
Without these other documents, you could very easily end up with a doctor or court making a decision regarding your health, assets, or future that you would not have made yourself.
The other concern in over-reliance on a will is the increase in assets passing outside of probate. Not only do many assets such as insurance policies or retirements accounts have beneficiary designations, a trust can offer greater flexibility and privacy than simply having a will.
Similar pitfalls occur with an overreliance on a Power of Attorney.
A Power of Attorney allows a trusted agent to make financial decisions on your behalf. Like a will, a Power of Attorney does not cover your medical care, only financial matters.
The other main challenge surrounding the use of a Power of Attorney is convincing others to accept it.
Many financial institutions place significant roadblocks in the way of utilizing a Power of Attorney. They can require specific language be used, the document be completed on their form, or to be updated/executed within a certain period of time.
The best way to combat these problems is thoroughness. Create a complete plan that not only makes the work easier by taking steps such as consolidating accounts, be explicit with what powers you are granting and to whom.
Avoiding these mistakes can be easy with the proper assistance.
For help creating a comprehensive estate plan or for assistance with any other elder law matter contact Abraham & Bauer today »
Planning ahead is a gift to your loved ones!
Mr. Abraham is an experienced attorney and founding member of the Law Office of Richard K. Abraham. The Sparks, MD office of the firm concentrates its practice in Estate Planning, Elder Law, Probate, Medical Assistance (Medicaid), Guardianship, Asset Preservation and Fiduciary Representation.
He is an active member in a number of professional organizations that focus on law, the senior community, and estate planning. He works with clients in Central Maryland, especially in Towson, Hunt Valley, Lutherville/Timonium, Parkville, White Marsh, Bel Air & Northern Baltimore City.
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