Estate planning begins with creating a Last Will and Testament, but, there is more to learn about this process after completing the initial document. The purpose of an estate plan is to prepare your loved ones (and yourself) for unexpected events and lay out final instructions for your estate after death.
Even if you don’t think you have enough assets necessary to create a will or trust, you still need to lay out instructions and wishes in the event of a medical emergency or death. You don’t know what can happen in the future, and without preparation, unexpected events can lead to even more stress for your family and loved ones. Any adult, regardless of marital or career status, should prepare an estate plan.
Preparing your complete estate plan is not as intimidating as it sounds. You can prepare all of the documents yourself without going through an attorney. You are able to work out all the major decisions for your estate plan in the comfort of your home for a low cost. Online document preparation services, such as Complete Wills, help make the experience less stressful and time consuming.
Not all documents in your estate plan deal with post-death instructions. You need to prepare instructions concerning what to do when involved in a medical situation that leaves you unable to communicate your wishes.
A living will is designed to communicate your preferences regarding medical treatment in the event you are unable to speak for yourself. This document is also known as a health care proxy.
You should consider naming a durable power of attorney (POA) as part of your estate plan for times when you are, for whatever reason, unable to make decisions for yourself. A durable power of attorney stands in for you to make important financial, business-related, or even health-related decisions if you are ever physically or mentally unable to do so for yourself.
This document can cover financial and medical decisions, or be limited to a specific area. You are able to appoint multiple powers of attorney. One party can act as a durable POA and another party can step in as a specific health-related POA.
You may also consider creating an advance healthcare directive. This legally binding document actually works as a combination of a living will and a healthcare power of attorney. You can lay out your specific wishes and instructions regarding your health care if you're ever unable to communicate with medical personnel. Within this document is the ability to appoint a representative to speak for you and make necessary decisions for your health.
The two necessary legal documents needed for a successful estate plan are a Last Will and Testament and a living trust. This doesn’t need to be an either-or decision because you can use a will and trust in conjunction with each other.
A will is a legally binding document expressing details of your final wishes, such as funeral arrangements, and how you want your estate to be dispersed. You can specify beneficiaries and choose your representative (the executor) to oversee the distribution of your assets.
A living trust is similar to a will because you include beneficiaries and instructions on how to pass along your assets. However, unlike a will, the trust can be set up while you are still alive and your assets can be transferred and secured in the trust until after your death.
The will and the trust can be used together to ensure nothing is missed and all of your bases are covered concerning your estate and any final wishes.
The main components of a Last Will and Testament involve the estate plan, the executor, beneficiaries, and a legal guardian (if applicable). Your estate consists of all assets, property, and items you own. You may divide up your estate however you choose.
The executor is the person who handles your estate and works with the probate court to ensure everything is handled properly. Your beneficiaries can be people of any age or organizations. If your intended beneficiary is still a minor, you may need to leave additional instructions and appoint a trustee of the child’s inheritance until they are a legal adult.
There are two types of living trusts, a revocable living trust and an irrevocable living trust. Both entities are established by a trustee while the party is still living and secures the assets until after the trustee dies.
A revocable trust is not considered “final” because the trustee can adjust or remove any part of the estate from the trust while they are still alive. Additionally, a revocable trust does not go into effect until after the trustee dies. With an irrevocable trust, it is considered “in effect” upon being established and the trustee cannot remove anything from it.
Probate is the legal process a deceased person’s estate goes through to determine how the assets will be distributed. If there is a will, it must be reviewed by the probate court to ensure it is valid before the executor begins dispersing the assets to beneficiaries.
The probate process typically takes two or three months, but it can be a longer procedure if the deceased did not have a will or the will was not considered valid by the court. The executor of the will is in charge of working with the probate court and managing the estate so all wishes and instructions of the testator are followed clearly.
You can also add beneficiaries directly to your financial accounts. The assets will transfer directly without going through probate.
There is more to an estate plan than making your final wishes known. Your loved ones need to know what to do in different situations after your death. It is crucial to have some peace in knowing all of your preferences and instructions will be carried out. Do not plan to fail because you have failed to plan.