Estate Planning Simplified: An Overview of 4 Estate Planning Tools
The start of a new year it is the perfect time to set intentions and evaluate your goals for the future. Estate planning is an often-overlooked aspect of future planning, and its significance is undeniable. Disinterest in estate planning may be due to unfamiliarity with the process, or the misconception that estate planning is irrelevant to one’s own life.
In the event of your death or incapacitation, adequate planning could relieve your family and beneficiaries from a great deal of stress and uncertainty. It may take less effort than you think and can give your loved ones the ability to more easily adjust to day-to-day operations in your absence. Here are several estate planning terms you should familiarize yourself with:
Last Will and Testament
A will (or, last will and testament) is a document that establishes the distribution of an estate as well as other preferences to be carried out following an individual’s death. When creating a will, an executor, or personal representative, is appointed to manage the estate, handle assets after death, and carry out wishes stated in the will. Additionally, a will can include personal preferences such as guardianship and pet care arrangements.
A will also allows you to designate beneficiaries to your estate. Whether you would like to leave assets to specific family members, friends, or charities, a will can be personalized to suit your needs.
Dying without a will –also known as dying intestate– can complicate the process of estate distribution. When someone dies without a will, their estate must be distributed via probate courts in accordance with state law.
For many, the probate process is undesirable, as personal preferences for asset distribution are do not always align with state law. Creating a valid will and/or having a valid, funded trust can allow your estate to circumvent the probate process.
A revocable living trust contains the assets and property of the trustmaker (Grantor) and can be altered during the trustmaker’s life. A revocable trust is a common choice for those who are far from retirement age, have assets that are continuously changing, or simply prefer the opportunity to amend terms as needed.
Irrevocable trusts cannot be updated once created. They carry with them their own advantages, such as providing beneficiaries with the guarantee that terms of the trust will not change.
Power of Attorney
A Power of Attorney document also allows one to appoint an agent to act on their behalf. Unlike a healthcare agent named in an advance directive, the agent named in a Power of Attorney document is not limited to making medical decisions. Decision making power may be broad or narrow (delineated by the individual creating the document) and can encompass personal, financial, and legal matters. As with previously-mentioned estate planning tools, a Power of Attorney document can be customized to protect what is unique and important to you.
The key to successful estate planning lies in taking action after carefully considering your options and priorities. In essence, a reliable estate plan can be viewed as a lasting gift to surviving loved ones. It is imperative that you plan ahead and take charge of your future.
Have you considered what types of medical treatments you prefer to receive in the event of a medical emergency? While some people have their own personal preferences, they may not have made their wishes known.
An advance directive document is also known as a living will. This document gives you the chance to formally establish your treatment preferences, as well as a healthcare agent that is tasked with making medical decisions on your behalf. These decisions include (but are not limited to) treatment related to a terminal condition, persistent vegetative state, and resuscitation.