Estate planning is one of those sensitive topics that nobody wants to think about and all too often is set aside to deal with another day. Yet, unexpected personal crises can happen at any age – whether it be cancer, a terminal illness, or an accident that leaves us incapacitated or worse, deceased. Proactive, thoughtful estate planning is key in ensuring the correct documents are in place to empower those we trust to make decisions on our behalf and ensure personal belongings are distributed as intended.
Depending on the types of assets and wishes for how they be dispersed to beneficiaries, estate plans are unique to the individual, however, the major documents and components are the same.
In simple terms, a will is a legal document that states how you want your belongings distributed after you pass away. If you have dependent children, a will is the appropriate vehicle to appoint a guardian to care for the children if both parents become deceased before the children turn 18.
Like a will, a trust is a legal document that states how you want your belongings distributed to after you pass away. A trust is used in addition to a will to allow assets within the trust to bypass the probate process resulting in a faster estate settlement and more privacy. Probate is a court-supervised process of distributing a decedent’s estate assets. Probate may apply to both those who have or lack a will. State requirements vary, however, it can be a long and costly process, especially if you have assets (like real estate) in multiple states. Trusts are not necessary for every situation and the pros and cons should be carefully considered with an estate planning lawyer.
Health Care Directive / Living Will
A health care directive or living will allows you to explain the type of health care you wish to receive in an end of life or emergency situation. This might include preferences on what treatments you would like to refuse in an end of life situation. Once completed, you will want to share this document with your health care provider and whoever you choose as your health care proxy or health care power of attorney.
Power of Attorney
A legal designation for someone to act on your behalf. A power of attorney can be broad or limited in scope. It can be immediate or only take effect after a specific event has occurred (i.e. incapacity). You may appoint one of your adult children to manage your investment assets as you age (financial power of attorney) or assign a person who can make medical decisions on your behalf should you become incapacitated (durable health care power of attorney).
Getting all the information in place to begin having an estate planning conversation is a feat in and of itself. Creating the legal documents can seem overwhelming. Luckily, there are professionals available to help guide you through this process. Estate planning lawyers can advise on and create the legal documents you may need in place to ensure your wishes are documented correctly. Tax planning professionals may also be part of this discussion to provide guidance on the current gift and estate tax rates and tax implications of various estate transfer strategies. And last but not least, financial advisors can facilitate and support the estate planning process by providing information on asset types and balances, clarifying your financial objectives and goals with the other estate planning professionals, and coordinating efforts to prevent details from falling through the cracks.