Many of us think of estate planning as something for our parents and grandparents to worry about. But, having a complete estate plan doesn’t just become important when fuzzy white caterpillars start crawling from your ears and nostrils. This fact hit me the other day courtesy of my smarter half.
I was sitting at the table drafting a simple will for one of my clients, when my wife came in from work. When I told her what I was doing she said “maybe you should write a couple wills for us?” I don’t say this often, but she was absolutely right. I haven’t hit my thirties yet. So even though I draft wills for a living, putting one together for myself has never seriously crossed my mind. However, my wife and I can check off the two most important boxes that indicate whether we need wills. We own real estate, and we have a mini-me on the way.
Regardless of your age, if you own your home and have children you should at the very least have a will, if not a full estate plan. Why? Because it’s the responsible thing to do. Without one, tragedy (knock on wood) could leave everything you’ve established floating in the wind. If you don’t know exactly what would happen with your children, or if you don’t know exactly how what you’ve established to this point will be used to leave them a legacy than you are leaving too much to chance.
Hopefully at this point you’re experiencing the same moment of clarity I had the other day. If so, here’s some information to help you understand the essential elements of a complete estate plan.
Wills
Wills are probably the estate planning document that people are most familiar with. A will provides instructions for how property should be distributed upon a person’s death. When a someone passes a way, their will is taken through the probate process, and their property is distributed according to their wishes. Someone without a will has no control over how their property will be distributed through the probate process. Instead, the property will be given to relatives according to intestate succession laws. Wills are also used to select guardians to take care of minor children.
Wills are surprisingly simple to put together, which is why there’s no reason not to have one. With a little bit of research, or the help of platforms like LegalZoom, many people are capable of putting a simple will together on their own. If you decide to go this route, make sure to have a professional review your handiwork to avoid any mistakes. If you’d like to have a professional touch from start to finish, M Zane {+} Associates is more than capable. I put a simple wills together for a flat fee of $200.
Trusts
Trusts are not essential to every estate plan. However, they can be a very useful tool. Therefore, I want to make sure you’re aware of them. I like to describe of trusts as holding companies for your personal assets. When you place property in a trust, the trustee becomes the legal owner. The trustee can use or dispose of the property as directed by the trust agreement. However, the trustee ultimately holds the property for the benefit of the beneficiaries named within the trust agreement. Within the trust agreement people can name themselves as the trustee or the beneficiary of their trust, but if it is their property going into the trust they cannot be both.
Trusts serve a few main purposes in the estate planning context. First, they are used to pass property to the next generation without going through the probate process. This helps people avoid the time and fees associated with probate. It also provides more privacy since probate is a process that goes on the public record. For those who own property in multiple states, a trust is a must have because it will keep them from having to go through probate in multiple states. Trusts are also a critical estate planning tool for parents with young children or children with special needs. Parents often establish trusts to ensure that their assets are protected and used to provide for their children’s well being.
Power of Attorney
A power of attorney (POA) is a document giving another person the ability to make certain decisions for you. POAs ensure that someone is authorized to make important decisions or manage your affairs if you are unable to. POAs are essential for those who want to designate a person to handle their affairs, who wouldn’t otherwise have the ability to do so. For example, someone who has been separated from her husband for ten years, but hasn’t gotten a divorce probably wouldn’t want him making medical decisions for her. A POA would allow her to designate a different person to make those decisions.
POAs come in a few different flavors. A healthcare POA gives your authorized agent the ability to make medical decisions on your behalf. For example, if you fell into a coma they could instruct your doctors about your care. A financial POA gives your authorized agent the ability to manage your financial affairs. This would allow them to pay your bills, financially care for anyone who relies on you, etc.
POAs can also be durable or limited. The difference between the two is that a limited POA ends when someone dies or becomes incapacitated, while a durable POA remains effective. Why would someone need powers of attorney after a person passes away? Well, think about someone who leaves instructions in their will that their funeral expenses be paid out of their savings account. Without a POA, there may not be anyone with access to that account. As a result that person’s family may have to come out of pocket to pay those expenses.
Living Will
Living wills serve a similar purpose to regular wills, but in a totally different context. While both documents express your wishes, a living will is a healthcare document. Its expresses your wishes regarding certain forms of medical care in case you are unable to express your wishes verbally. So for those who feel particularly strong about receiving or not receiving certain forms of medical care, a living will is an essential estate planning document.
Beneficiary Designations
Last, but not least, are beneficiary designations. Beneficiaries are the people who are selected to receive the assets of a life insurance policy or financial account upon the death of the account owner. Selecting your beneficiaries is probably the simplest element to any complete estate plan. However, people often forget to name beneficiaries, or update them as time goes on. Setting your beneficiaries is important because it allows your assets to pass quickly and easily to the people you want to receive them.
Life can get hectic…
But that’s no excuse to not get your ducks in a row. Especially when starting an estate plan is as simple as making a phone call. Whether you need a will put together for the first time, or need your estate planning documents overhauled after a major life event, M. Zane {+} Associates is ready to assist you. My focus is on making the estate planning process as simple and pain free as possible, so that you can have hassle free peace of mind. If you’re interested in getting your estate plan in order give me a call at 267-475-7052, or schedule a free consultation and receive a call at a time that’s convenient for you.