There may come a time when you need someone to handle financial matters or make medical decisions on your behalf. If you have not formally nominated someone in advance through estate planning documents and you become incapacitated (unable to manage your affairs), a court may need to step in and appoint a decision-maker based on state law. Planning ahead lets you choose someone you trust to manage your affairs instead of leaving that decision to a judge. The following are two key roles to consider:
- Agent under a financial power of attorney. This person handles your financial matters, such as paying bills, managing accounts, and completing transactions. The power of attorney document defines the specific authority granted to the agent and also specifies when an agent can act. It is important to choose someone responsible, organized, and able to dedicate time to the role. If you have no trusted family member or friend who is suitable, you may opt to work with a qualified professional.
- Agent under a medical power of attorney. If you are unable to communicate or make medical decisions, this person will step in on your behalf. Naming a healthcare agent, instead of relying on a court-appointed individual, allows you to retain control over who will make those decisions. Choose someone who understands your wishes and who is willing and able to advocate for them. If a family member is not the right fit, a close friend may be a good option. Keep in mind that some states restrict who can serve in this role, such as healthcare providers.
Choosing the Right Recipients
If you have no estate plan in place, state law will determine who receives your money and property at the end of your life. In general, assets are distributed in a set order defined by state intestacy statutes—typically to a surviving spouse first, then to children or grandchildren, followed by parents, siblings, and other relatives, depending on who is living at the time.
This default approach may not accurately reflect your wishes, especially if you are single and childless, or if you want to leave your assets to someone other than your family members, such as specific individuals or charities.
It is also important to review beneficiary designations on accounts, life insurance policies, and retirement plans. Such designations usually override your will because they pass automatically and outside of probate—the court process for settling an estate—meaning they will control who receives those assets.
- If no beneficiary is named, the asset may be paid to your estate, which can require probate, a process that can add time, cost, and complexity.
- In some cases, the account agreement will dictate a default order of recipients, which may not align with your intentions.
- For retirement accounts, missing or outdated beneficiaries can also lead to unintended tax consequences.
Taking the time to name and periodically update your beneficiaries helps ensure that your assets are distributed according to your wishes and avoids unnecessary complications for your loved ones.