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Estate Planning Tools for When You’re Ill or Injured

  • 27 August 2014
  • Author: Cari Holbrook
  • Number of views: 3007
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Estate Planning Tools for When You’re Ill or Injured

Estate planning tools like a will and trusts can help ease the transition of a family business and reduce estate tax when you pass away. But what happens when you—the business owner—become hurt or incapacitated? According to the Council for Disability Awareness, a typical, healthy 35-year-old working male has a 21 percent chance of becoming disabled for more than three months during his career. Factor in smoking and just 10 pounds of excess body weight and the likelihood climbs to 45 percent. The statistics vary only slightly for women.

Becoming disabled to the point of incapacitation (the inability to care for or make decisions for yourself) can be financially devastating for any working adult, much less a business owner. But business owners can plan ahead; utilizing estate planning documents that may lessen the impact incapacitation will have on loved ones and the family business. These documents include:

·         Durable Power of Attorney – Allows you to dictate who will handle your financial affairs when you are unable to do so. Without it, your loved ones must rely on the court to award guardianship and, in the meantime, will have a much more complicated time transferring the assets necessary to care for you and your business. This can include accessing payroll and carrying out other critical business functions.

·         Medical Power of Attorney – This legal document allows you to name the person you’d like to be responsible for making medical decisions on your behalf (also known as a healthcare proxy). Some business owners choose separate family members to act as durable power of attorney and medical power of attorney to, essentially, keep “business matters” and “personal matters” detached.

·         Living Will – Ask anyone who has served as a healthcare proxy before and they’ll likely tell you the burden is lessened greatly when the patient’s wishes for decisions like artificial resuscitation and life support are known. This document can serve that purpose. A living will can also be helpful to your durable power of attorney by laying out who you believe should have the power to deem you incapacitated—a doctor, for instance, or a panel of individuals hand-selected by you.

·         HIPAA Release – This is, perhaps, the simplest of all the documents but may be a key to unlocking all the others. That’s because, without a HIPAA release form naming who can be privy to your protected medical information, your loved ones may have a harder time gaining access to the information they need to put the other documents into play. And, as a business owner, you know: Eliminating red tape is not always easy, but is necessary.

·         Practice Continuation Agreement – For professional practices such as doctors or lawyers, having an agreement with another practice that provides assistance to your clients in the event of either a short-term disability (usually six months to a year) or death is essential. The value of a professional practice begins to diminish at an accelerated rate with the owner’s absence.

While we cannot take the place of an attorney when it comes to advocating for estate planning, we often refer our CPA clients to estate planners.  Most often, our direct interest is in helping clients reduce taxes through estate planning tools like trusts. However, protecting your and your family’s wellbeing with the documents mentioned above is certainly an added benefit. The value of estate planning—whether for end of life or incapacitation—lies in its ability to maintain your power of choice and protect you and your loved ones, in any scenario.  

Copyright: goodluz / 123RF Stock Photo

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