Understanding the fundamentals of estate planning are essential for anyone who wishes to ensure their wishes are carried out if they become incapacitated or pass away. This includes making decisions regarding property, young children’s belongings, taxes, avoiding probate proceedings, healthcare during life and what happens to your body after death.
Basics of Wills
No matter the size of your estate or family, understanding the basics of wills can help protect your assets and leave a legacy for those closest to you.
A will is a legal document that details how you would like your property distributed upon death. It also names an executor to take care of any remaining business matters.
In addition to selecting an executor, you should identify beneficiaries for any property you wish to leave to individuals or organizations after your death. This could include stocks, checking or savings accounts, real estate, family heirlooms, cars and more.
State law will ultimately decide who inherits solely owned assets (like a car, home or checking account) without the benefit of a will. Probate can be an expensive and time-consuming process that may cause your heirs unnecessary stress and strain.
Basics of Trusts
Trusts are a popular estate planning tool and help protect property. They can be advantageous for those wishing to reduce costs and hassles, make charitable gifts, leave assets to minors or manage state income taxes.
Trusts come in a variety of forms and each is tailored to fulfill its purpose. The basic elements that make up a trust are the Grantor, Trustee and Beneficiary.
Beneficiaries are those to whom a trustee administers trust assets. The trustee has the power to invest and distribute assets among beneficiaries.
Revocable or irrevocable trusts can be created by the grantor and amended at any time during their life.
Trusts can avoid probate after death, provide specific instructions for using assets and provide support during illness or disability. Furthermore, these trusts help eliminate family feuding by offering guidance and direction regarding distribution of wealth and assets.
Basics of Living Wills
A living will is a document that details your end-of-life medical care in the event you become unconscious or unable to speak for yourself. It plays an integral role in estate planning.
Giving clear instructions to physicians and medical staff allows for better communication, respects your wishes, and prevents conflict among family members during a life-threatening illness.
Advance directives can also help avoid conflicts in the event of a loved one’s passing, which can be particularly challenging for families.
A healthcare power of attorney, on the other hand, designates someone to make medical decisions for you in case you are unable to make them yourself.
Both documents can be an essential component of your estate plan, but they serve distinct purposes and have distinct legal ramifications. It’s essential to comprehend the fundamentals behind each one so that your plan works effectively and meets all of your individual requirements.
Basics of Powers of Attorney
A Power of Attorney (POA) is a legal document that permits another individual to act on your behalf. This person, known as an agent or attorney-in-fact, has the authority to make decisions related to financial affairs and medical care on your behalf.
A Power of Attorney (POA) can be either general or specific in scope. General powers allow agents to act on a variety of matters, while limited ones restrict their authority.
Durable powers of attorney (POAs) are a type of POA that remain in effect even if their principal becomes incapacitated. They’re essential to have in place, as they can protect you and your estate if you become mentally unable to manage your affairs.
Your attorney should be able to explain the fundamentals of powers of attorney and how they pertain to estate planning. Your best bet is to do some research online or ask friends for referrals.