Studies are done periodically that are intended to gauge the estate planning preparedness of Americans. They continually find that the majority of people do not have a comprehensive estate plan in place.
Many people are not even aware of the fact that estate planning is necessary. What exactly is estate planning? Let’s look at the basic anatomy of an estate plan.
You must facilitate future transfers of your monetary assets when you are planning your estate. If you don’t have some type of legally binding estate planning document in place like a will or a trust, you will die intestate.
Under these circumstances, the state will distribute your assets using intestate succession laws. This can be a time-consuming process, and the outcome may not be consistent with your true wishes.
You could use a last will, but you have other options. When you use a last will to state your final wishes, the will must be admitted to probate before the heirs receive their inheritances.
Probate can be a costly and time-consuming process. If you were to use a revocable living trust instead of a will, the beneficiaries would receive their inheritances in a more timely manner outside of probate.
Advance Directives for Health Care
When you are planning your estate you should also consider the period of time that will precede your passing. You may become unable to communicate your own decisions due to a medical condition.
To account for this, you can execute advance directives for health care. One of these is a living will. With a living will you state your wishes regarding the utilization of life-sustaining measures.
Another directive that is typically utilized is a health care proxy or durable power of attorney for health care. With this document you name someone to make medical decisions on your behalf.
If you were to become incapacitated, who would handle your financial affairs? You can answer this question when you plan your estate. Those who use a revocable living trust can name a successor or disability trustee. This individual or entity would be empowered to administer the trust should the grantor become incapacitated.
It is also possible to execute a durable financial power of attorney. The agent or attorney-in-fact who is named in the document could handle the affairs of the grantor in the event of his or her incapacitation.
In this post we have provided a brief and basic explanation, but there is no one-size-fits-all estate plan. Each case is unique, and there are different strategies that can be employed depending on the circumstances.
Personalized attention is the key to a well constructed estate plan. If you would like to discuss things with a licensed estate planning attorney, contact us to schedule a free consultation.