There comes a time when most of us start wondering about what will happen to our assets once we pass. And usually, the more things we own, the harder it is to decide what should be done with them once we’re no longer in the picture.
However, when you seek advice on the matter, you will find many differing opinions, making it even more challenging to decide what to do. That’s why in this article, we will be giving you some insight into these important decisions and providing an overview of beneficiaries and medical directives.
Keep reading to learn about what medical directives and beneficiaries are, why they’re important, and some potential issues that can arise if you don’t have them.
What Is a Medical Directive?
Also called advance directives, medical directives can help you be sure that your wishes will be carried out even if something goes wrong with you health-wise. There are several types of medical directives, and in this article, we will cover the most common ones.
What Is an Advance Directive?
An advance directive contains a set of instructions that outline all your wishes regarding your health care. It is used when you’re in a difficult medical situation or when you’re no longer able to communicate your wants.
Advance directives can be used in the case of terminal illness, dementia, coma, stroke, and other ailments that inhibit your ability to make decisions. There are different types of advance directives, and the most popular ones include a living will, medical power of attorney, and a do-not-resuscitate (DNR) order.
How Is a Living Will Different?
A living will is a type of advance directive. All living wills are advance directives, but not all advance directives are living wills. A living will outline your health care wishes as you near the end of your life due to a terminal illness that impairs your ability to make decisions.
It’s the document that tells your medical providers what treatments you will be willing to take if you’re unable to advocate for yourself properly. It also includes how long you want your life to be prolonged, and it can include your religious preferences.
Medical Orders
Medical professionals create medical orders by consulting with their patients. They’re used to inform other medical professionals about the wishes of the patient regarding different life-sustaining treatments. These orders are most often created when the patient is terminally ill.
A do-not-resuscitate (DNR) order instructs medical staff not to enact life-saving measures like an automated external defibrillator or manual resuscitation. On the other hand, a do-not-intubate (DNI) order forbids the medical staff to intubate a patient.
A Portable Order for Life-Sustaining Treatment (POLST) gives the medical staff instructions regarding cardiopulmonary resuscitation (CPR) and the extent to which they can apply other medical interventions. POLST documents may come under various names, such as Transportable Physician Orders for Patient Preferences (TPOPP) or Medical Orders for Life-Sustaining Treatment (MOLST).
Medical Power of Attorney
A health care power of attorney (POA) is often called a durable power of attorney for healthcare or a medical POA. It’s a legal document that allows you to name someone as your health care agent or proxy.
A person with POA can make medical decisions on your behalf if you’re in a situation where you’re unable to do so. In order for that to happen, the patient’s physician first has to confirm that the patient is unable to make decisions on their own.
Power of attorney is not typically included in living wills, and that’s why many people need to have both documents.
Enforceability
If you want to be 100% sure that your wishes get carried out, having an advance directive is perhaps your best choice. A medical power of attorney ensures that your health care agent will communicate with your physicians and state your health care wishes.
A living will express your preferences for what you want to happen towards the end of your life, so medical personnel and family members must comply with your wishes, even if they object to them.
You should keep in mind that every state has its own laws regarding advance directives, and some states allow only certain types. That’s why it’s essential to research the restrictions in your state before considering what kind of advance directive to use. For example, some states only allow for verbal advance directives.
Another thing to remember is that there is no template for what you have to include in an advance directive or a living will, so the documents may vary significantly.
What Is a Beneficiary?
Alongside medical directives, an essential part of end-of-life planning includes naming beneficiaries. A beneficiary can be any person who receives a benefit or gains an advantage from something.
In the financial world, a beneficiary is someone who acquires profits/assets from a trust, will, or life insurance policy. Beneficiaries are often explicitly named in these documents, or they have met the stipulations and are eligible for receiving their share of the assets.
Usually, any entity or person can become the beneficiary of a will, life insurance, or trust. As the distributor of funds, you can put various stipulations on the spending of the funds, such as the beneficiary getting married or growing to a certain age. Along with that, there can be tax consequences for the beneficiary.
With that said, one of the most important things you have to do after retiring is determined where your assets will go in the event of your death. Otherwise, they might not end up in the right hands. Failing to name any beneficiaries can also have a disastrous effect on your family’s finances if you or your spouse pass away before making the required plans.
Life Insurance Policy Beneficiaries
Money that comes from life insurance is generally tax-free and is not reported as a gross income. However, if any interest is received or accrued, that sum is taxable and should be reported.
Beneficiaries of life insurance can be individuals, such as a spouse or an adult child. However, trusts and other entities can also serve as beneficiaries. For example, if your children are below the age of 18, you may want to establish a trust and name it as the beneficiary of your life insurance policy.
In that case, if something happens to you, the policy’s death benefit would go towards that trust. From there, the trustee must manage those assets according to the terms of the trust on behalf of your beneficiaries (your children).
Along with that, there are two types of beneficiaries–revocable and irrevocable. Revocable beneficiaries can be changed at any time while the policy’s owner is still alive. In that way, it’s similar to a revocable living trust.
On the other hand, an irrevocable beneficiary is permanent. Therefore, if there are multiple beneficiaries to one life insurance policy, they all need to consent to changes involving an irrevocable beneficiary.
If a life insurance policy has more than one revocable beneficiary, its owner can change the beneficiaries at any time. This is sometimes necessary in cases where a beneficiary passes away, or the primary beneficiary is now an ex-spouse.
However, if you have named irrevocable beneficiaries to a life insurance policy, you would need the irrevocable beneficiary’s consent and any contingent beneficiaries to make the change. That’s why you should consider your decisions very carefully before choosing beneficiaries.
Why You Should Always Have a Beneficiary on Your Account
Your passing will have an impact on your close family and friends, regardless of the financial side of the matter. However, if you haven’t taken the necessary steps to ensure that your assets are well-distributed, you might cause your family even more distress.
Naming a beneficiary is vital because it helps take the stress away from your friends and family once you die. It enables you to determine who you want to give your property and money to once you’re gone.
If you do not name beneficiaries, your entire estate will have to go through legal proceedings such as probate in order to distribute your property and other assets to living heirs and family members. This process can be time-consuming and draining for loved ones. Additionally, since probate involves a court-supervised system of sorting your assets, they will be assessed and distributed based on state laws as opposed to your particular wishes.
In Conclusion
Making plans for the end of life is not fun, but unfortunately, there’s no way around it–it’s just a part of responsible medical and financial planning. Taking the time now to make decisions about what will happen if you become terminally ill or after you die will make things easier for both you and your family in the future.
Having a living will or another kind of advance directive will help you rest easy knowing that your medical wishes will be taken into consideration even if you are unable to express them one day. On the finance side of things, choosing beneficiaries will ensure your assets are distributed properly amongst those closest to you.
Please feel free to reach out to me on this or any of your investment needs or questions. I may not always have the answers at my fingertips, but I promise I will get them for you. Michael Torrence
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Michael Torrence – Investment Advisor Representative: Michael was born and raised in Ohio and attended The Ohio State University. After College, he was commissioned as a 2ndLt in the United States Marine Corps. He attended his initial training in Quantico, Virginia, then graduated at the top of his Primary Aviator Class and was selected for the Strike (Jet) Platform.
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