When it comes to personal finance and financial planning people often forget a very important aspect, Wills and Power of Attorney. Although having a Will and Power of Attorney is not going to help you reach any financial goals directly, it is an important aspect of your personal finance and should be part of your financial planning. This is a very simple overview of Wills and Powers of Attorney, the issues are more complicated and a lawyer should be consulted.
What is a Will?
A Will is a legal document in which a person provides instruction on how their assets are to be distributed and who will become caregivers for any minors. A will is your final wishes. If you die without a will you die “intestate” and your assets are distributed according to your provincial or state laws, which may not always be what you wanted, therefore it is vital to have an update will.
Important Parties in Will
This is the person you have chosen to execute your wishes, the executor is responsible for making sure your taxes and bills are paid and your will is executed as you wanted it. Generally you state what percentage of your estate should be paid to the executor.
Is the party, who will receive some of your assets, you can have several beneficiaries in your will. The executor and beneficiary could be the same person but due to potential conflict of interest it is better to avoid that.
Even if you do not have a lot of assets it is important to have a will and updated annually or as your situation changes. Dying intestate can cause family disputes and lawsuits, all this can be prevented if an updated Will is in place. Having a Will does not mean there won’t be any disputes and potential lawsuits, however it will reduce the changes significantly.
Holographic Will- This is a handwritten will and is consider to be valid as long as it can be proven that it is written by the testator.
Powers of Attorney
Power of Attorney basically gives someone else to right to act on your behalf; there are two types of powers of attorney.
Power of Attorney for Personal Care
This type of power of attorney gives someone the right make decisions regarding your health on your behalf if you are unable to do so, for example when you are in coma. It can be very broad and general powers or very specific powers they may have. There can be many cases where someone else may need to make an important medical decision on your behalf the only way one can do it is through the power of attorney. This can be the difference between life and death so don’t leave it up to chance, have an updated power of attorney for personal care.
Power of Attorney for Financial Matters
If for some reason you are unable to make financial decisions and need someone else to do it for you, you will need a power of attorney for financial matters. This will give your power of attorney access to your finances and they will be able to make financial decisions. This too can be as specific or as broad as you want it to be. This is different than your power of attorney for personal care, you need to have them both in your financial planning process.
Many are often concerned with the cost associate with these documents, but they forget the potential cost of not having them. Depending on our situation a Will can cost between $100-$2000 and more, the more complex your situation the more expensive it will be. There may also be charges for annual updates, but not having a Will can cost your family a lot more. Powers of Attorney are usually cheaper, but again it depends on your situation.
Regardless of the cost Wills and Powers of Attorney are an absolute must for everyone, especially those with families. Your financial plan is incomplete without them.
Here is a will kit that has been put together, it includes your Last WIll, Power of Attorney for Personal Care and Power of Attorney for Financial Matters. Although it is designed with Canadian Laws in mind, it will work for most US residents as well.
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