The biggest mistake that people make with estate planning is not actually creating an estate plan. This is usually because of the common misconception that Estate and Trust Planning is only for the old and rich. Similarly, people see estate planning as “planning for death.”
While no one can predict the future, one fact always remains true: by leaving unanswered questions for our loved ones, we are leaving them with headache and heartache. Engaging in basic Estate Planning can eliminate the need for expensive and stressful litigation in the case of a medical emergency. That’s why we recommend that adults of all ages and financial backgrounds engage in, at the very least, basic estate planning.
There are a few estate planning documents that everyone should have:
- Last Will and Testament and Living Trust: Even without substantial assets, a Last Will and Testament (“Will’) forms the cornerstone of your estate plan. As intimidating as it may sound, a Will, in its most basic form, is a vehicle that allows you to control how your property is passed after your death. It allows you to designate an Executor to ensure that your instructions are carried out. There are many different provisions that you can draft into your will, including, but not limited to articles that: designate who will serve as Guardian of your minor children, specify an arrangement to provide care for your pet(s) after your death, leave assets in trust for minor or spendthrift beneficiaries, and take advantage of applicable tax laws. Many people like to combine a Will with a Living Trust (often called an “inter vivos” or “revocable” trust) to avoid probate. A Living Trust allows you to place your assets in Trust for your benefit during your lifetime (or however you designate) and specify whom you want your property to be passed to at your death (including remaining in trust). This planning does not require you to give up control of your assets, and in theory is no different than you owning the assets outright.
- General Durable Power of Attorney: Most people don’t want to think about what happens to them in the event of a disability, or they say, “I don’t have any money anyway, so why would I need someone to handle my finances.” While they make a compelling argument, an Agent under a General Durable Power of Attorney does a lot more than just manage finances. It is true that an Agent has the ability to transact all business on your behalf, including opening and closing accounts, buying and selling assets, and paying bills. However, what people don’t realize is that should you need to apply for public benefits (like Medicaid), which is likely if you have no assets to pay for your care, or if you do have assets and need some sort of financial planning to protect them, no one will have the authority to do so. Without a Power of Attorney in place, the only suitable remedy after-the-fact is a potentially expensive lawsuit to be appointed Guardian. Contrary to popular belief, a spouse or a parent does not automatically become your Guardian if you become incapable of making decisions for yourself.
- Health Care Proxy and Living Will: In the case of a disability, what can be more important than who will make financial decisions is who has the authority to make medical decisions for you. As mentioned above, a spouse or parent does not automatically become the Guardian of an adult if they become disabled. A Health Care Proxy (also referred to as a Power of Attorney for Healthcare) appoints an Agent or Representative to make medical decisions for you when you cannot make the decision yourself. A Living Will (also referred to as an Advanced Directive) allows you to leave instructions and preferences should you be unable to make health care decisions yourself.
To schedule a free 15-20 minute consult to determine if these documents are right for you, please click on the “contact us” tab or call the number above.