Many people believe estate planning is only for the wealthy with large financial “estates”. The reality is that estate planning makes sense for all individuals no matter their financial situation. For example, estate planning can help people who have minor children, business owners, people who have a goal to minimize taxes, and just about anyone who wants to determine how their assets are handled after they are gone. There are four fundamental estate planning tools most everyone should consider: a will, a durable power of attorney, a living will, and a medical power of attorney (or health care proxy).
The Will. A will is a legal document that details where you want your assets to go and who is going to oversee the execution of your property. It also may state who is to care for your minor children. Without a will, the laws of the state will determine how your assets are divided up after your death. Therefore, your heirs may not receive your estate according to your preferences, your children may not have the guardian you wish to care for them, or your estate could end up paying more in taxes and fees. One common misunderstanding is that a will eliminates the need for probate. It does not. If avoiding probate is your goal, other tools such as a living trust or transfer-on-death account registration may be more suitable.
The Durable Power of Attorney. A durable power of attorney is a document that allows you to designate a representative, such as your spouse or adult child, to perform actions for you in the event you become unable to manage your affairs. This representative could pay bills or make major financial decisions on your behalf, depending on how broad or narrow you limit their powers. Without this documented authority, loved ones would have to go through the delay and expense of seeking approval from the courts to carry out financial needs.
The Living Will & Medical Power of Attorney. A living will is a written declaration of what life-sustaining medical treatments a person will or will not allow in the event they become incapacitated. A medical power of attorney is a document that authorizes a person to make medical decisions on your behalf, and ideally carry out what you have specified in your living will. These two documents can be hard to understand, so before appointing someone it is important you talk to that person to make sure they understand and are comfortable carrying out your wishes.
Other ways to make this undesirable period easier for your family is to communicate your wishes ahead of time, create a to-do list for what they should do the day after, the week after, etc. Also, make sure to inform them where to find important documents, the to-do list, and advisors’ contact information. To keep your estate tools accurate and up-to-date, estate planning should be reviewed every five years, when legislation is updated, or whenever a life event such as marriage, new child, or divorce happens.
Don’t put estate planning off any longer and contact our office for help at 515-284-1011 or firstname.lastname@example.org.