Estate Planning Basics:
There are many questions surrounding creating an estate plan. A well-formed estate plan has many aspects to it, and does not just cover what happens to your savings and house when you die. Many considerations should be taken into account when planning your estate, and you should plan for both your passing and potential incapacity.
Trust or Will?
One of the most common questions we are asked for estate planning is “Should I have a trust or a will?” A will is a legal document that directs who will receive your property on your death and also appoints a “personal representative” that will carry out your wishes. The process of distributing your property is court supervised and is also called “probate”. A trust is also a legal document, often longer and more complex than a will that operates to distribute your property before death, at your death, and even can control your property well after you pass.
A Here are some main differences between a will and a trust.
- Avoiding Probate: One of the biggest advantages of a trust over a will is that it avoids probate, the court supervised process of distributing property of a deceased person. This can be costly and time consuming. Furthermore, probate is a public process and filed with the court, whereas administration of a trust is private.
- Appointment of Guardian: A trust alone cannot appoint a guardian for children, whereas a will can do that.
- Estate Taxes: In some cases, a trust can help avoid estate taxes.
Ultimately, a good estate plan may involve both a trust and will, to gain the advantages of both. In particular, many people choose a Living Trust and a “pour over will” to ensure many aspects are covered.
Planning for Incapacity
There are several documents that are crucial to planning for your incapacity. You need to consider who might make medical decisions and also financial decisions in case you are unable. The important thing about these documents is that you must create them before you become incapacitated otherwise they won’t be legally valid.
- Power of Attorney: A power of attorney is a document that allows another person to make any financial decisions you set out in advance, including paying bills and taxes and making necessary payments.
- Advance Directive and Living Will: These documents allow another person to make health care decisions and also allow someone else to make decisions regarding life support.
- HIPAA Authorization: This document is about giving another person authorization to talk to your doctors about your conditions. It is a vital part of your estate plan.
Do you have an estate plan? Do you need to review yours?
It is important to create an estate plan to cover both your property, but also to create a plan if you become incapacitated. Also, even if you have created an estate plan, it is wise to occasionally review your plan with an attorney to ensure it meets your needs.