Estate planning is the process of planning for how an individual’s assets and liabilities will be managed, preserved, or distributed after incapacitation or death. One of the goals of estate planning is to distribute the individual’s assets in the timeliest, most tax-efficient manner in accordance with the wishes of the incapacitated or deceased individual. Estate planning poses a significant challenge because it forces one to think about their own incapacitation or death. That being said, it is imperative to get organized and think about these events well before they occur so you can ensure your family is protected in the manner you see fit and your assets are handled exactly how you want them. There are four basic documents you will need to begin building your estate plan.
A will states how you want your assets to be distributed to your heirs upon your death. If you have minor children, your will also states who will be their guardian going forward. In setting up a will, you need to name a personal representative who is charged with settling your estate. It also makes sense to name a backup personal representative as well, should anything happen to your primary personal representative. Personal representatives can be family members, trusted friends, or even attorneys. When choosing your personal representative, you will want to choose someone who you trust will be fair and responsible in carrying out their duties
Durable Power of Attorney for Finances
This document is also known as a financial power of attorney. It grants an individual, most often your spouse, the authority to make financial decisions on your behalf in the event you become incapacitated. You can grant as much or as little authority to your attorney-in-fact. The person you decide to grant this power to must act in your best interest, maintain accurate records, keep their property separate from yours and avoid all conflicts of interest.
Advanced Health Care Directive
This document, also referred to as a living will, works in conjunction with the durable power of attorney for health care. Your advanced health care directive will outline the type of care or life-sustaining support measures you do or do not want; including CPR, tube feeding, and dialysis. This document can also outline your preferences for medical decisions pertaining to pain management and organ donation.
Durable Power of Attorney for Health Care
Much like the durable power of attorney for finances, the durable power of attorney for health care grants an individual the authority to oversee your medical care and make health care decisions on your behalf should you become unable to do so. The person you grant this authority to will work hand in hand with your doctors and other health care providers to provide you with the medical care you wish to receive.
It is highly recommended you consult with an estate planning attorney as you begin this process, as they will be able to help you draft the necessary documents to best accomplish your goals and meet your wishes. Creating an estate plan can afford you the opportunity to gather and organize your finances to ensure your estate does not go through probate. In this light, it should be considered more of an opportunity rather than a chore.
Sources: Schwab, Investopedia, Mayo Clinic
*This article is provided for informational purposes only and should not be interpreted as investment advice.