Estate planning covers crucial elements that can be applied to the many stages in an individuals life. Some key decisions that estate planning covers are retirement, social security, property distribution after death, long-term care, Medicaid, and asset protection among many other things. What items should one be familiar with before they begin preparing their estate plan? Here is a short list to better understand how to prepare properly:
Last Will and Testament: Everyone is familiar with a will. It is a document you prepare that states how your property should be distributed after you pass away. You choose an executor in the will which is a person who will manage your property after your passing. You also appoint a guardian in your will in the event you have a minor child or an individual who is mentally changed that was under your care.
Trust: Trusts come in many forms. You have revocable and irrevocable trusts which are the two main categories. Think of a trust as a company that holds onto your assets. This bank has what is called a trustee which is the individual who manages the assets. Based on how the trust is stipulated, the trustee acts accordingly and distributes the funds of the trust as directed. With a irrevocable trust you no longer own the property which helps you save on estate tax. A trust is also a great way to avoid probate. Probate is unavoidable when you have a will in place.
Durable Power of Attorney: People can sometimes be unavailable to handle their financial affairs either because of logistics in traveling or sickness. We take for granted the day to day things we are able to do like pay our bills, go to the bank, close on real estate transactions, and many other things. If you are unable to do any of these actions because of a disability but need them to be done, consider preparing a Durable Power of Attorney. This document appoints an individual to do said actions for you. We outline the exact limitations to what they can and cannot do.
Living Will: Although you see the keyword will, this document is completely different from a a last will and testament. This document stipulates what should take place during a situation where you fall into a coma. You decide ahead of time in a living will on whether or not you should be kept on life support.
Guardianship: You can appoint a guardian to watch over a minor child or an individual who is mentally impaired. As the guardian, you would be paying their bills, admitting them to an institution, and taking care of their day to day needs.
This is just a short list of what is available to you. We do recommend you get in touch with an estate lawyer to better direct you on what exact tool would best suit your personal situation.
