Attorneys and other experienced professionals know that estate planning should be part of any overall personal financial plan. But for many - and even for some of those experienced professionals - estate planning is a confusing and difficult to understand concept. In fact, many of my clients who have obviously done their own internet research on the subject often misunderstand the basic components of even the simplest estate plan. The purpose of this brief article is to provide an overview of basic estate planning.
Estate planning involves both planning for the possibility of incapacity and planning for certain death. And the fact is that almost everyone, at one point or another, can save thousands of dollars - and plenty of headaches - by having an estate plan in place.
If you become mentally or physically disabled, then you will need to have a two part estate plan in place – one that will take care of your healthcare decisions and one that will take care of your financial decisions. Otherwise, you - and your money - will end up in a costly and unpredictable court-supervised guardianship or conservatorship.
An Advance Healthcare Directive is a legal document that can delegate your personal healthcare decisions. It will allow you to give to the person of your choice the right to take care of your personal needs and make your medical decisions if you are unable to do so yourself.
A Power of Attorney for Finances is the legal document necessary to delegate your financial decisions. It will allow you to choose someone to manage your assets on your behalf if you're unable to do so for yourself.
Of course, an estate plan also involves planning for death. Everyone should have a two part estate plan ready in the event of death. One part ensures that all your debts will be paid, and the other part ensures that your property goes to the people you want it to go to.
A Will is a document that instructs a person you choose to distribute your property the way you want. But using a will has a major drawback - it must go through a time consuming and costly court process called probate. Using a trust can avoid probate.
A Trust is a legal document that can avoid the drawbacks of using a will. Using a trust will allow you to control your property while you are alive and well, designate the person of your choice to manage your affairs if you become disabled, and then direct the person you choose to distribute your property when you die.
Too often people ignore their estate planning needs and leave their loved ones to grapple with the courts and other family members over issues that could have been resolved with basic estate planning.
The process of planning your estate begins with considering your current situation and identifying your goals. Before you consult with an estate planning attorney, you should answer these key questions:
✔ Who do I want to inherit my assets?
✔ Who will manage my affairs if I cannot manage them myself?
✔ Who will take care of my children if something happened to me?
Without an estate plan, the courts will decide these answers for you. Having an estate plan in place will allow you decide for yourself the answers to these questions. Once you answer these questions, you can consult with an estate planning attorney to discuss ways to ensure that your wishes are met.