When tragedy strikes, you want to have a solid plan in place. This is especially true when it comes to estate planning. You might be tempted to put off estate planning because your current situation doesn’t lead you to think you’ll need an estate plan anytime soon. However, it’s always best to plan ahead.
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Careful estate planning can prepare you and your family for many situations that you might face. For example, you could become incapacitated. If that happened, would your family know how to act on your behalf? Would they know who should make the financial or medical decisions for you? What happens when you die? If you become incapacitated or die, without a sound estate plan, people you don’t know could end up making decisions that affect you and your family.
Components of a Rock Solid Estate Plan
While the idea of putting together an estate plan may seem daunting, estate planning can make life easier and give you peace of mind. Whether you want to make sure that you’re not put on life support or you want to ensure that specific items in your estate go to a certain family member, there are estate planning documents to address your concerns. If you want to make sure that you’ve covered your bases, consider including these legal documents in your estate planning toolbox:
With careful planning, you can have a rock solid estate plan. Your family may be able to avoid the cost and the inconvenience of going through court proceedings in order to make decisions on your behalf. Your spouse and children can receive exactly what you’d like for them to have when you’re no longer here. Finally, making your wishes clear makes it less likely that your family will end up in a legal battle over your assets. Estate planning isn’t just for the wealthy. No matter your age or net worth, estate planning could be beneficial for you.
Most people think of a last will and testament when they hear the term “estate planning.” Wills serve an important purpose in estate planning because a will allows you to leave property to your loved ones and make sure your loved ones are properly taken care of when you die.
In a will, you’ll be able to name the beneficiaries of your estate. Beneficiaries are the people who receive assets from your estate. You could name family members, friends, or even charitable organizations as beneficiaries of your estate. Not only can you leave houses and cars to beneficiaries, but you can also leave specific items of sentimental value to a particular person.
You can also name guardians in your will. If you have minor children, you can name someone you trust to take care of them in case you die before they reach adulthood—this person is called a guardian. In most cases, it’s a good idea to name an alternate guardian, also. An alternate guardian can assume the role of guardian for your children if the first person that you chose is unable to do so.
You’ll also be able to name the person you’d like to serve as your executor. An executor or personal representative is the person who’ll manage the assets of your estate. This person has the responsibility of paying off debts and distributing assets in accordance with the instructions that you leave in your will.
What happens if you don’t have a will? If you die without a will, a court could decide who will distribute the assets of your estate and how they’ll be distributed. Courts follow the laws of intestacy in making these determinations. Needless to say, the court’s determination might not match up with what you would’ve wanted. The probate process could go much more smoothly for your family if you state your wishes in a will.
Depending on your circumstances, you and your family might benefit from the creation of a trust. There are several types of trusts, so you can pick the type that best suits your goals. For example, if you have a child who is disabled, you have the option of establishing a special needs trust. If you are concerned about creditors trying to reach assets held in a trust, then you can create an asset protection trust.
Many people find that a revocable living trust suits their family’s needs. A revocable living trust is an attractive option because:
- The trustmaker creates the trust during their lifetime
- The trustmaker can change or revoke the trust
- The trustmaker has control over the assets in the trust and how they can be distributed
When you create a revocable living trust, you transfer property or real estate to the trust. The trust then becomes the owner of the property (due to the transfer of title). The trustmaker, however, continues to have control over the assets in the trust during his lifetime. Trustmakers who use living trusts for this purpose often make themselves the initial trustee. They name a successor trustee who’ll handle the assets in the trust after they die. A revocable living trust usually becomes irrevocable when the trustmaker dies.
You might be wondering how a revocable living trust is different from a will. Both of these estate planning tools can be used to transfer property to your loved ones. However, there are differences between revocable living trusts and wills.
One big difference is that assets in a trust aren’t subject to the probate process. That is because assets in a trust have been removed from the estate. This can be important if you’re concerned about estate taxes.
Another difference has to do with privacy concerns. Wills become public record, while trusts are private. If you are concerned about others being able to access records about your assets, you might be interested in using a trust.
3. Durable Powers of Attorney
Powers of attorney are important estate planning tools that can benefit you and your family in a variety of ways. A power of attorney is a legal document that gives someone else the authority to act on your behalf in some capacity. The person you authorize to act on your behalf is called an agent or attorney-in-fact.
There are two main types of powers of attorney: the financial power of attorney and the health care power of attorney. A financial power of attorney grants an agent the authority to do things such as paying bills and withdrawing money from bank accounts on the principal’s behalf. A health care power of attorney grants an agent the authority to do things like authorizing a medical procedure or accessing medical records on the principal’s behalf.
Powers of attorney can be useful to your family if you ever become incapacitated. If you are unable to make financial or medical decisions for yourself, someone will have to make them for you. If you have a power of attorney, your family won’t have to worry about going through the courts before someone can make these decisions for you. This saves your family the time and expense that would come with court involvement.
If the purpose of your power of attorney is to make sure someone can make decisions for you if you are incapacitated, you’ll want to have a durable power of attorney. Generally, powers of attorney end when the principal becomes incapacitated. If a power of attorney is “durable,” it means that it continues beyond the incapacity of the principal.
If you decide on signing a power of attorney, make sure you pick someone you trust as your agent or attorney-in-fact. You can even pick more than one person. Just keep in mind that your agent or agents will have the duty and the power to act in your best interest.
4. Advanced Healthcare Directives
You may not have spent a lot of time thinking about the type of health care you’d want if you were in a vegetative state or in a coma. However, it could be important to sit down and think about the decisions you’d want someone to make for you if you were unable to make these decisions for yourself.
Would you want to be put on life support? If so, how long would you want doctors to provide life-sustaining treatment? How do you feel about organ donation? You can use a living will to spell out exactly what type of treatment you would or wouldn’t like to receive if doctors determine you are in a vegetative or terminal state.
What’s the difference between a durable power of attorney for health care and a living will? Both documents can come in handy if you’re unable to make medical decisions for yourself. In fact, you might wish to have both documents in your estate plan in order to make sure that you’ve covered as many different scenarios as you can. However, there are differences.
You do not need to be in a permanent or terminal state of illness in order for a durable power of attorney for health care to take effect. If you’re in a condition that renders you unable to make decisions about your health care for yourself, then your agent or attorney-in-fact can make decisions on your behalf under the durable power of attorney.
The durable power of attorney for health care and the living will are estate planning tools that can be used together. For example, you could sign a durable power of attorney for health care that names your cousin as your attorney-in-fact. Rather than having your cousin make his own decisions about your health care, you could instruct your cousin to carry out the wishes you’ve outlined in your living will.
In the alternative, you could name a person to carry out your wishes in the living will itself. If you have an attorney-in-fact and a living will, the attorney-in-fact is not allowed to make decisions that go against the instructions in your living will.
What to Do Once You Have a Solid Estate Plan
Once you’ve put together a sound estate plan, you should think about where you’re going to store your estate planning documents. It’s important to store your documents in a safe place where they can be found if something happens to you. If your family can’t access these documents when they need them, they might have to go through a court process to gain access to them.
It’s a good idea to provide copies of your estate planning documents to the people and institutions that you know will need them. For example, provide a copy of your financial power of attorney to your bank, and give a copy of any healthcare directives to your medical providers.
You’ll also want to update your estate plan as needed. When a major life event occurs, you might want to revisit your estate planning documents. For example, if you get married or have a child, there could be changes you’d like to make to your estate plan.
Not Sure Where to Start? Contact a Lawyer
Estate planning can address the many issues that you and your family could face in your lifetime. It could also help to prepare you for retirement or death. In any case, proper estate planning can give you the peace of mind of knowing that you’ve done what you could to make difficult times just a bit easier for your family.
Delaying the process of estate planning could be a mistake. You never know when your family might be faced with a situation that calls for quick and decisive action. You don’t want arguments or disagreements among family members to make a bad situation worse. Contact a local attorney who can help you put together an estate plan.