Estate planning. It may not be something we care to think about when we’re healthy, building our careers, and enjoying family life, but that’s exactly when we should be thinking about it. By being proactive now, we can ease the burden our loved ones may face in the future. There are three important documents that most of us need in estate planning. Theresa M. Hinton, Esq., CTFA, Vice President & Trust Officer at Fidelity Bank, gives us an overview of what those documents are, why they’re so important, and how your bank can help.
Document #1: Durable Power of Attorney (DPOA)
What it is.
A durable power of attorney (DPOA) is a legal document in which you give someone else the right to act on your behalf now, while you’re alive, continuing through periods of incapacity.
For example, if you are in a car accident, if you undergo surgery, or you’re taking medication and these circumstances cause you to be incapacitated, the durable power of attorney continues. It goes into effect now, while you have the capacity to make decisions, and it ceases upon death. (At that point, your will goes into effect and the executor/executrix will settle your estate).
Why it’s important.
If you don’t have a durable power of attorney and something happens to you, and your family or friend needs to access your accounts to, for example, pay your bills, they won’t have any legal documentation proving that they are permitted to act on your behalf. They will have to request the court appoint a guardian to handle these matters. If you don’t want to burden your loved ones in this way, choose someone you truly trust to act on your behalf, and then work with an attorney to draft a durable power of attorney.
Document #2: Will.
What it is.
A will is a legal document that clearly states how you want your assets to be distributed after death. It’s a set of instructions to your family and to the Commonwealth of Pennsylvania.
Your will is your set of instructions on how you want your property to be distributed upon death. You can stipulate that you want your bills to be paid, and leave specific bequests of money or items (jewelry, cars, furniture, collections, etc.) to specific people.
Your will also includes directives regarding the residue (items that are left after all gifts have been distributed) of your estate. Most people leave the remainder of their estates to family members. Some people opt to give the residue to charity.
Your will includes assets that will go through probate (the legal process that occurs following death). Not all of your assets will be part of your probate estate. Assets that may not be included in probate include:
Why it’s important.
If you die without a will, it means you have died “intestate,” leaving the distribution of your assets up to the discretion of the state or commonwealth.
Pennsylvania law has an intestacy statute that stipulates if someone dies intestate (without a will), the legislature of the Commonwealth of Pennsylvania will decide how their assets are distributed among surviving family members. (In this case, family refers to a spouse, children, grandchildren, parents, grandparents, siblings, nieces, nephews, aunts, uncles, or cousins). Of course, every situation is unique, but here are two common examples of what may unfold when a person dies intestate:
Scenario #1: There is a surviving spouse and children, but there is no will.
It’s natural to assume that in this case, all the assets would transfer to the surviving spouse, but that’s not necessarily true in every case:
Scenario #2: There are no surviving family members, and there is no will.
If you die without a will and you don’t have any surviving family members (spouse, children, parents, brothers, sisters, nieces, nephews, uncles, aunts, cousins or grandchildren), your property will escheat (revert back) to the Commonwealth of Pennsylvania and go into the state coffers.
The Bottom Line
Document #3: Living Will.
What it is.
A living will, also called an advance directive, is a set of instructions detailing your preferences for end-of-life medical care if you are terminally ill and there is no chance of recovery. For example, you may state your preference about receiving blood products, artificial resuscitations, antibiotics, or life support. This document is not legally binding on your family or physicians, but it does state explicitly what your wishes were when you were happy, healthy, and cognizant.
Why it’s important.
Even though a living will isn’t legally binding on family or physicians, it can certainly help to reduce the emotional burden family members will face in making extremely difficult decisions about your end-of-life care. It’s an important step worth taking while you’re healthy, mentally and physically.
How Your Bank Can Help
In addition to an attorney, your bank can also play an important role in estate planning. While they do not provide legal advice, Trust Officers at Fidelity Bank offer general guidance regarding estate planning, and they work in conjunction with attorneys to ensure the process goes as smoothly as possible. Upon request, they also provide referrals of attorneys they work with, and trust.
There are certain situations in which establishing a trust is important. For example, if you have a will and you are leaving money to a family member who has special needs and is receiving government benefits, the receipt of money could disqualify that person from receiving public benefits unless the gift or bequest is made into a special needs trust for that family member.
In addition to the special needs trust, Fidelity also regularly handles irrevocable trusts, revocable (living) trusts, and charitable trusts. To learn more, visit our Trust Services page and scroll down to “Trustee.”
Fidelity’s Investment Managers help clients invest their money in pursuit of their financial goals. This may also be an important part of estate planning.
If you’re looking for general guidance in estate planning, Fidelity’s Trust Department will be hosting a series of informative sessions at offices in Dallas, Pittston and Peckville coming up in August. Stay tuned for details or contact Theresa Hinton at (570) 504-2260 or theresa.hinton at fddbank dot com .
Daniel J. Santaniello, President and CEO, of Fidelity Bank, publishes Financially Fit with Fidelity, your guide to financial well-being, every Thursday. If you’re interested in a financial topic we haven’t yet covered or want to subscribe to our emails, please feel free to drop us a line at blog at fddbank dot com. We would love to hear from you.