Foran Financial Group Reviews POAs, Health Directives and Insurance

The Coronavirus pandemic continues to sober our thoughts and, for many, contemplate our mortality. A silver lining to all the gloom is that we can use this period as an opportunity to bring our legal and financial plans up-to-date. Part of legal planning is to document our wishes and empower trusted individuals in case of incapacitation or death. This is confusing for many people, so we at Foran Financial Group, want to help break it all down.

In regards to financial planning, important legal documents include:

  • Power Of Attorney (POA)
  • Health directives
  • Beneficiary forms for insurance policies, retirement accounts and other assets
  • A will

These documents aren’t just important for the elderly, as many people assume. Establishing POAs, health directives, beneficiaries and your plans after death is important for anyone, specifically parents and adults who have financial responsibilities for others. These documents specify the terms of your medical treatment, how your finances and assets are divided should you pass away and what happens to you if you can no longer care for yourself. As the Coronavirus pandemic has showed us all, this isn’t always expected. Let’s use this pandemic as a catalyst for change.

Power of Attorney

A POA is a legal document in which you specify someone to make decisions on your behalf when you no longer can yourself due to physical or mental incapacity. There are several types.

  • Durable POA: A durable POA remains in force through the remainder of your life unless you revoke it or set a date when it no longer applies.
  • Non-Durable POA: A non-durable POA dissolves when you become incapacitated (which is probably not what you want).
  • Financial POA: This gives another person control over your financial interests during periods when you can’t maintain control.
  • Medical POA: This gives another person control over health-related issues during periods when you are incapacitated.
  • General POA: You can set up a general POA to name a person to handle your financial and health-related affairs or divide the job between a financial and a medical POA.

Financial POA

If you can no longer do so, your financial POA agent can make critical financial decisions on your behalf, settle or stake claims, buy life insurance, operate your business interests and protect your assets. By creating a financial POA, you can choose a qualified person who you trust and who will first and foremost look out for your best interests. Without a financial POA, you may invite disputes among your relatives that end up in a court case.

Medical POA

A medical POA is vitally important. A sudden health threat can initiate a very hectic, confusing period. A medical POA allows a trusted individual to make medical decisions if you aren’t in a position to make them yourself. Your POA can withhold or approve permission for medical treatments and services (such as dialysis or blood transfusions) according to your wishes, so it’s important to extensively discuss your preferences with the person you choose for this position. You can supplement your medical POA with a living will to specifically address end-of-life issues.

Setting up a POA

You must be of sound mind when creating a POA, which is why you should do so sooner than later, when your physical and mental health are good. Standard legal forms are available that you can fill out and have notarized. Better yet is to work with an experienced attorney to draw up your POAs. You can always change your durable POA if conditions warrant. You simply destroy the existing document, replace it with a new one or prepare a formal revocation document.

It is important to discuss your POAs – as well as any changes – with your financial advisor so that your wishes are understood and included in your financial plan.

 

It’s never too soon to start planning for your future. Contact Foran Financial Group and get the discussion started.

 

Health Directives

A health directive, also called an advance directive, is a document that specifies which medical treatments you want or don’t want. It becomes active when you are incapacitated or otherwise cannot personally communicate your wishes. Health directives often include a durable medical POA (as described above), a living will and specific directions.

A Living Will

A living will instructs medical providers of the treatments you are willing to accept. Typically, a living will pertains to end-of-life medical issues. For example, you might specify whether you would accept a feeding tube or kidney dialysis. You can include directions, such as a Do Not Resuscitate (DNR) or Do Not Intubate (DNI) order.

You do not appoint a medical representative in a living will – that’s the job of a medical POA. Many times, people will use a living will instead of a medical POA, although you can specify both. If you do create both, be aware that your living will overrules your medical POA if the two are in conflict.

Life Insurance

With everything going on right now, it is an excellent time to review your life insurance, including its terms, death benefit and beneficiaries. For example, you might want to increase the death benefit of your policy, which may require a new physical exam. However, you might be able to convert a term policy to one with cash value without undergoing a new medical exam.

It’s also wise to review your beneficiaries at least once a year to ensure this person or charity is still who you want it to be. People get married, divorced and pass away. Children may show signs of financial incompetence, which can lead you to make other plans for your money. Charities can fold, change management or adopt new values. If your beneficiaries are not updated when a change occurs, there can be a lot of money left to the wrong people.

Beneficiaries

You can always modify the revocable beneficiaries for your life insurance policies. You can name primary and contingent beneficiaries. The latter receive the death benefit if the primary beneficiaries pass away before you do.

If the policy has irrevocable beneficiaries, you cannot change beneficiaries without the consent of existing ones.

Beneficiaries can include individuals, legal guardians, your estate, trusts and charities. If you name multiple beneficiaries, you can designate one of two approaches:

  • Per stripes: The death benefit is passed down and divided among the beneficiaries and/or surviving children of beneficiaries.
  • Per capita: All of the death benefit is divided among the beneficiary survivors of the lineage line.

Note that these beneficiary considerations apply to other assets, such as your retirement accounts, annuities, brokerage accounts and so forth.

Wills

A will is a legal document that specifies how to distribute your assets and investment accounts to your family and others should you unexpectantly pass away. It’s important to understand what a will can do as you plan for your family’s future.

Dying intestate (without a will) turns important decisions over to a state probate court judge who will follow standard procedures to distribute your wealth. A will allows you to name your beneficiaries and the amount they inherit, which might be quite different from what your state considers to be standard.

You can also use a will to name a guardian for your children and create trusts that start up upon your death. Using trusts, you can address specific concerns, such as caring for a special needs child, managing your investment portfolio or preventing a child from misusing a bequest set up for college expenses.

Reviewing Your Documents and Plans

Make sure to involve your financial advisor in your estate planning. At Foran Financial Group, we will work with your CPA, lawyer and other qualified professionals to ensure that all of your important documents are up-to-date.

Considering the current circumstances, procrastination is not a good idea.

If you are not currently working with a financial advisor or are ready for a second opinion, contact us. Foran Financial Group is happy to help.

 

Foran - Get Retirement Ready eBook

Foran Financial Group has a combined 58 years of experience helping families with their financial plans.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of the advisor, and not necessarily those of Raymond James. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Past performance may not be indicative of future results.