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Estate planning is the process of putting a plan together to take care of your family and you assets when you die. No matter how little you may have in assets it is important to have a estate plan in place. Key elements of an estates plan include a will, powers of attorney and possibly trusts. We’ll cover each of these in turn
The first and often the most important instrument to put in place is your last will and testament. A will is a legal document that outlines your wishes regarding your assets after you die. Many people make their own wills through software or forms they download off of the internet but this isn’t always a wise choice. Requirements for wills are different from state to state and are not always easy to interpret. If you don’t create a will that can be validated in probate court then your estate may be disposed of as if you never even wrote a will. The bottom line is that hiring a professional to help craft your last will and testament is a smart choice and it can be done for a reasonable fee.
Power of Attorney – A power of attorney is a legal document that authorizes somebody to act on your behalf in legal or business matters. A durable power of attorney is a special kind that allows the rights granted to be effective if you become incapacitated due to injury or mental illness. Durable powers of attorney can by financial and medical in nature. A Health Care Power of Attorney is a durable power of attorney that authorizes the appointed agent to make health care decisions for up. The authorization can include the ability to stop life sustaining medical support if it is keeping a terminally ill patient alive.
A living will communicates your intentions regarding health care if you become unable to communicate them on your own. A living will is usually created in tandem with a health care power of attorney. The living will spells out your wishes and the heath care power of attorney allows somebody else to act based upon those wishes.
Trusts – Trusts are legal devices that let you place restrictions on how and when your assets will be distributed upon your death. A great example of establishing a trust is if you want to leave assets to your minor children. You can place those assets in trust and limit the asset dispersal schedule to future ages or events that you deem appropriate. Trusts can also be used as a tax planning device to allow your assets to be transfer by a different path.
Tax planning – There are a wide variety of tools that can be used to manage the tax burden at your death. These include life insurance, life insurance trusts, charitable remainder trusts, qualified personal residence trusts and more.
Your first step is to create a list of all of the property you own. Once you have this list make a determination about who you want to receive each item. At this point it is a good idea to talk to your immediate family regarding your wishes as this can avoid significant problem in the future.
There are also other instruments available for estate planning but the important thing is to work with professionals to craft a plan that meets your specific needs and desires.
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