What exactly is estate planning? It is twofold: (1) it’s deciding what to do with your possessions after you are gone and (2) it’s making sure your health care wishes are carried out if you become incapacitated. While most people don’t want to think about death and what happens when they die, it is still a good idea to begin planning for a time when you will no longer be around.
There are a few reasons why this is a good thing for you to do while you are still living and in good health both mentally and physically.
First, planning how you divide up your assets before you pass on lets you decide what happens to your stuff instead of a relative, friend, or the courts. When a person dies without any type of will or trust set up, all of their financial assets and property are subject to the laws of the state. Simply put: you will have no control over who inherits what you once owned. Everything is left up to pre-determined laws that have been set up by the state.
Also, when you die, your friends and family will already have a tough time coping with your loss. Making it easy for them to handle your estate is a great gift to give them. Having everything planned will allow them time to grieve and reduce the stress of fairly dividing your assets.
Lastly, if your estate is subject to taxes, a proper plan can help reduce or even eliminate these taxes, allowing your family to keep most of your assets instead of handing them over to the government.
If you decide to move forward with an estate plan, you will include a few important documents to make sure that all your bases are covered. A typical estate plan should include:
- a will that is the primary document regulating your wishes as regards inheritance and guardianship;
- a trust that relates to protecting assets for the benefit of yourself and/or specific persons;
- a living will (also called a healthcare directive and proxy) that specifies your intent as regards decisions on your physical well-being and end-of-life arrangements respectively;
- a power of attorney that enables a trusted Agent to make financial decisions for you in the event that you are incapacitated; and
- for parents with minor children, a temporary guardianship document that names a trusted adult to care for minor children in the event of your incapacity.
A lawyer can help you clarify how to move forward with your estate plan and deal with any special circumstances you would like to consider.
