Estate planning is an integral part of life planning and involves putting certain legal documents into place to ensure beneficiaries are provided for in the event of your death. While no one jumps for joy at the thought of planning their estate, it is imperative to implement at least basic elements to protect your family.
At minimum, estate planning should include a Will; providing Power of Attorney authority to someone to manage your affairs in the event you are unable to do so; and arranging a Living Will or Healthcare Proxy (medical power of attorney). For some people, a revocable or irrevocable living trust may be beneficial.
Executing a Last Will and Testament is a relatively simple process. A Will provides directives on how you want your assets distributed when you die. If you die without a Will, everything you own is transferred to probate. A probate judge determines who receives your financial holdings, real estate and personal belongings.
If you have minor children, making a Will is of particular importance. Guardianship of minor children can be established within the Last Will and Testament.
Dying intestate (without a Will) can tie your estate up in probate court for months, or even years and can be costly to your heirs. Regardless of how much or little you own, you need to have a Will in place. An estate planning lawyer can help you put together a basic Will or arrange a trust. Depending on the complexities of your estate, a Will can range in price from $69 to $2500.
In order to execute a Will, you will need to create a list of your assets including investments, retirement accounts, life insurance policies, real estate holdings, and any business interests. Next, you will need to decide who you would like to give those assets to upon your death.
While it might seem creepy to discuss your plan with heirs, it is important to talk things over and let everyone know where you stand. Doing so can prevent misunderstandings and family disputes when you are gone.
Designating Power of Attorney authority is an important decision and should not be taken lightly. POA grants authority to the designated agent to act on your behalf in managing your financial affairs. The person you choose should be trustworthy and willing to take on the role if you are incapable of making decisions for yourself.
A living will documents your wishes for medical care that you do or don't want should you become critically ill and unable to communicate. You can decide whether or not to implement life-saving directives such as resuscitation, nutrition or life support.
For obvious reasons, you want to choose your healthcare agent carefully. Before designating your chosen agent in a living will, it is a good idea to discuss this role with them. The person you choose should understand medical information regarding your treatment and be capable of making difficult decisions while keeping your best interests and wishes in mind. This is a tough job and requires someone who is able to deal with stress and make quick decisions when needed.
Trusts are beneficial to people who possess a net worth of at least $100,000. There are several types of trusts; however, the most common are revocable and irrevocable. Setting up a trust requires the services of a qualified estate planning lawyer.
Estate planning is not just for the wealthy. Regardless of your assets and net worth, it is always a smart decision to execute a Will and designate Power of Attorney and healthcare agent privileges to people you can trust to carry out your wishes.