It’s a new year, so let’s look at some financial resolutions, specifically, the basics of a solid estate plan. Not having these basics in place can cost a person’s family thousands of dollars in legal, medical, and/or probate fees. When most people think of estate planning, they think of wills and trusts, but there are other documents that are just as, if not more, important.
Everybody should have powers of attorney in place. This is how you designate who can make decisions for you while you’re still alive when you can’t make them for yourself. There is a durable power of attorney, an advanced medical directive,
and a living will.
The durable power of attorney will allow the person you choose to do things like pay your bills without giving him or her direct access to and ownership of your bank accounts. This is a much better and more protected option for you than putting your son or daughter’s name on your accounts.
An advanced medical directive (known in some states as a healthcare power of attorney) is a power of attorney specific to healthcare decisions. In a case where you are unconscious or unable to speak for yourself, this allows the person you designate to make decisions about whether surgeries or procedures should be performed.
The living will is probably the most uncomfortable document for someone to put in place, because it addresses difficult end-of-life decisions. A living will makes it possible to clarify your views regarding feeding tubes and life support measures while you can still make decisions for yourself.
Not having these legal documents in place when an accident or illness strikes can lead to guardianship and conservatorship hearings, and you do not want anyone in your family going through one of these.
Once these living legal documents are in place, you can turn your attention to after-life legal documents.
If you don’t put anything in place, whatever assets are in your name at the time of death go to your descendants who hold the highest claims, according to state statutes. There is a possibility that some of your worldly goods could go to someone you would rather not receive a part of your estate.
A properly executed last will and testament is a legal document that goes before the probate court, instructing that court what your wishes are concerning your assets and/or the care of your children. While this is better than not having anything in place at the time of your passing, issues could arise during the probate process. An estate that is probated becomes public, and the records are kept at the local courthouse. A will and the probate process are contestable, which means there is a chance that the court could overrule your wishes and redirect your assets.
If you want to keep the state and probate out of your business, then you want a properly executed and properly funded living trust. A living trust is a vehicle which owns your assets that you can change and control while you’re living. If the trust is properly funded, after you die, there would be no estate to probate because all of your assets are owned by the trust. That way, your estate does not become a part of public record and the trust will also become irrevocable. This can make it more difficult for someone to contest the distributions, and therefore, allow the estate to be settled on a timelier basis.
While different families need different legal plans, everybody needs the estate planning basics.