Forty-six-year-old Tony Hsieh was the CEO of Zappos, the popular online shoe and clothing company that became famous for its ‘no-shipping costs’ service strategy. Tony had a net worth estimated at $840 million and was an extremely bright individual. Unfortunately, he passed away from burn injuries sustained in a house fire in November of last year. Being bright and wealthy, you would have expected him to have a sophisticated estate plan. As it turns out, his estate plan consisted of a bunch of sticky notes that included a $30 million angel fund to be set up for tech start-ups and other businesses in his newly adopted hometown of Park City, Utah. The result is a complete mess that will likely take years and millions in legal fees to resolve.
Not many of us are worth $850 million, but your estate’s size does not make the planning any less important. It does not have to be incredibly complicated. Here are the three main pieces of any well-crafted estate plan:
- Will. Your will outlines who will receive your assets that do not automatically transfer by title (such as joint ownership of your home) or beneficiary designation (such as the beneficiary of your 401-k plan or life insurance). Typically this will be a surviving spouse and/or children. If your children are minors (under age 18-21 depending on your state of residence), you will need a trust, and you will need to choose a trustee. There may be other reasons for using a trust as well, such as to manage the money for your spouse or children.
- Power of attorney. With this document, you appoint someone to act on your behalf during your lifetime for financial matters such as paying bills, making investment decisions, etc. Often, your spouse is a good choice or a responsible adult child.
- Advance Healthcare Directive. This is divided into two parts: a Living Will and Power-of-Attorney for healthcare decisions. With the living will, you outline the level of care you desire should you become incompetent to make your own decisions. This includes such decisions as to whether to have a feeding tube or incubation. A power of attorney allows you to designate someone you trust to ‘over-ride’ your living will directives based on the facts and circumstances.
While all of these pieces can be done using online tools and services such as www.LegalZoom.com, I strongly recommend you use an attorney skilled in estate planning because every situation is unique. Ask your accountant or financial advisor for a recommendation.
For weekly insights, follow The Welch Group every Tuesday morning on WBRC Fox 6 for the Money Tuesday segment.
FOX 6 TALKING POINTS
Do You Have a Will?
3 Elements of an Estate Plan
- Power of Attorney
- Advance Directive for Healthcare
Stewart H. Welch, III, CFP, AEP, is the founder of THE WELCH GROUP, LLC, which specializes in providing fee-only investment management and financial advice to families throughout the United States. He is the author or co-author of six books, including J.K. Lasser’s New Rules for Estate, Retirement and Tax Planning- 6th Edition (John Wiley & Sons, Inc.); THINK Like a Self-Made Millionaire; and 100 Tips for Creating a Champagne Retirement on a Shoestring Budget.
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