February 25, 2007

A Financial Tip from Ali G

Don't make financial decisions when you're high. Seriously.

Along those lines, a corollary: make contingency plans for how your financial matters are handled in case you become incapacitated. Most people know about wills, the legal documents which determine the legal disposition of the deceased's estate. There are a lot of do-it-yourself solutions both on the Internet and books, but there's no substitute for having a good attorney (not the emphasis on good), particularly if your personal and financial situation is anything more than straightforward. As we've been reminded this week via the tabloids and popular press regarding Anna Nicole Smith, estate law can be extremely complex.

What about for those situations where you're incapaciated but not deceased? A Power of Attorney is a legal document that can be drafted to grant someone of your choice the power to make financial decisions for you should you become incapacitated or incompetent.

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Blogger Mike said...

Is dying intestate so bad?

Now, if you plan on giving sums to charity, have a collection of rare property you don't want broken up, or would like to require potential heirs to spend a night in a haunted house, I can see why a will is important. But for a typical person, who will be survived by a spouse or children, I think state intestacy schemes do a pretty good job of allocating assets.

Death planning outside of estate distribution (funeral planning, tax considerations, do not resuscitate requests, etc.) do seem to be important, but can be handled by a financial planner, someone I'd imagine the Honcho's would advise us to go to anyway.

Bear in mind, all I know about intestacy is what I studied in law school. It may be the case that probating a will is more efficient than intestacy. Still, I wonder if consulting an attorney and preparing a will is really as important as Mr. Honcho says.

February 25, 2007 at 5:31 PM  
Blogger Mr. Honcho said...

I guess my response is - it depends.

The vast majority of people die intestate, and that very well make work well for a lot of people. Clearly, it makes no sense for someone with 10K of assets to spend 1K on a lawyer to help draft up a will. Also, if you're 30, married, with a couple young kids, not having a will probably makes sense there too.

However, I don't think you have to have a ton of assets, or have any particularly unique or special assets, to utilize a will. Planning ahead can go a long way in making one's intentions known and clear up any miscommunications or misunderstandings once you are deceased. Having a will can go a long way in putting control in your hands ex ante, leaving out any potential interference from (or burdens on) family members or the government afterwards. Like all financial decisions, whether one needs a will or should use an attorney to do so is a very personal decision as family dynamics are unique and personal to each individual. You'd be surprised by how easily the death of someone who dies intestate can quickly boil into family strife or result in the manifestation of long-stewing sibling rivalries (e.g. a situation I recently heard about involved 2 daughters, one of whom who took care of their elderly mom while she was sick, while the other daughter had no involvement at all. The father was already deceased. Because of the high cost of taking care of the mother, the mother told the daughter taking care of her that she would leave all her assets (a modest amount) to repay her daughter for the cost of taking care of her. When the mother died intestate, the mother's assets were sold and divided evenly, leaving the daughter who took care of her mother not enough assets to pay off the mother's medical expenses and other costs. The other daughter refused to chip in).

So, perhaps, my response should be qualified in the following way: if you want to control how your assets are disposed of upon your demise, making a will is a good way to do that. And, if you're planning on making a will, and your intentions for your will are important to you, strongly consider using the help of an attorney to make sure your wishes are properly documented.

As for using a financial planner, you guessed wrong! Mr. Honcho thinks that most people do not need to use a financial planner, but that's another post for another day.

February 25, 2007 at 6:12 PM  
Anonymous Anika said...

This is great info to know.

November 10, 2008 at 4:58 PM  

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