Most people feel that they are not wealthy and therefore don’t think they need an estate plan. Many people tend to downplay their life’s accomplishments and sacrifices, and consider their lives well-lived, but not necessarily extraordinary. Most have worked hard during their careers (or are still working hard!) to build up retirement savings and other savings accounts and perhaps purchased a home, and have built equity. Some have raised children and provided a good life and quality education for their children. When considering all of these accomplishments, many individuals lives are more successful than they give themselves credit for. Wealth, or our own personal definitions of wealth, has nothing to do with whether we should have a plan in place for our inevitable incapacity or distribution of our assets upon our death. Estate planning is a smart and heroic decision to make to ensure peace of mind for the future, and is as important of a decision as any that we’ve made in our lives.
Reflect on the achievements you’ve made in your life and congratulate yourself for working hard and being responsible over the years. But don’t stop there! Solid estate planning requires continuity of your hard efforts and continued diligence to ensure your life’s work is sustained for you and your family into the future. Without an official estate plan, the laws of the state in which you die will determine how your assets will be divided and who will care for your minor children, should you have children when you pass away. Estate plans typically include either a will or a trust that designate when, how, and to whom you want your belongings to be distributed. Estate plans also allow you to designate an agent to make medical and financial decisions on your behalf, should you become incapacitated and are unable to make those decisions for yourself. Let us help you explore these options:
What exactly is an estate plan?
A comprehensive estate plan is comprised of four key elements: Will, Trust(s), Medical and Financial Powers of Attorney, and a Living Will. Your estate planning attorney will also review your current beneficiary designations, to ensure continuity with your estate plan.
A will is a legally binding document that directs who will receive your property and assets after your death. It names an executor or personal representative – the person who you want to carry out those directions. A will also names a guardian or guardians who will care for your minor children or other dependents, should you die or become incapacitated.
A will gives you control over your legacy, is straightforward, and can be changed during your lifetime.
A trust is a legal arrangement through which a trusted individual, or trustee, manages accounts and property on behalf of a beneficiary or beneficiaries. Trusts avoid probate, as the assets are transferred into the trust during your lifetime, as opposed to after you have passed away.
A revocable living trust, allows you to retain control of your assets transferred into the trust during your lifetime, with the freedom to revoke or change the terms at any time. Revocable living trusts also allow for incapacity planning and the continuous management of your property during your lifetime by a successor trustee, should you be unable to manage the assets yourself. Your successor trustee will also then manage the assets, as directed, upon your death.
Whether you should create a trust or a will depends on many factors, and every situation is different. Whether or not you want your estate plan to be administered privately or publicly is one of the primary factors in determining which estate plan is right for you. Remember, assets owned by a trust avoid probate, and are kept private, because they are transferred during your lifetime; whereas, assets not owned by a trust must be transferred by the public probate court process, which takes time, after your death
POWER OF ATTORNEY
A financial power of attorney allows you to designate someone as your agent to make financial decisions on your behalf, should you become incapacitated and unable to make the decisions on your own. A Power of Attorney can be general, giving the designated agent the authority to conduct any type of business, or specific, limiting your agents power to transactions expressly outlined.
Designating a power of attorney is especially important if you are not married since this role would typically fall to a spouse. Without a designated power of attorney, your family members or loved ones will have to ask a judge to choose someone for you.
ADVANCED HEALTH CARE DIRECTIVE (LIVING WILL)
A health care directive is like a power of attorney in that it designates someone you choose to make healthcare decisions for you if you are unable to do so yourself. There are two main documents in a health care directive:
1. A living will, which is a written statement that provides instructions for your health care, should you become terminally ill.
A health care proxy, which designates a person who will make medical decisions on your behalf if you become incapacitated.
Often times, family members will disagree about what steps should be taken in your care; therefore, it is good to have a health care directive in place to ensure your wishes are carried out.
Incorporating these five elements into your estate plan is just the first step toward ensuring that all of your wishes will be carried out when the time comes. It is especially important to establish a maintenance plan to review each document on a regular basis with your estate planning attorney to ensure everything is always up to date.
The Harris Law Firm is ready to help you design and create your own estate plan. Let us know how we can serve you.