When talking about estate planning, many individuals don’t understand how it is relevant to their lives. Because of a misunderstanding about the different challenges estate planning manages, it gained the reputation of something only the wealthy and elderly need.
For most of us, that couldn’t be farther from the truth.
Estate plans include many different types of documents such as advance directives and special needs trusts— documents that are not only important but often a good idea to set up early.
As such, the following are some basics you should know about different types of estate plans and the documentation you want to have on hand during the estate planning process.
More than Just a Will: Detectives
As mentioned above, a will is not the only estate planning document. These other documents are known as advance directives and aim, no matter what your age, to leave a plan of how to manage your health and finances should you be incapacitated. Some common advance directives are:
Durable Powers of Attorney
Powers of attorney are when you allow another individual to have decision-making authority over your life and finances should you be mentally incapacitated. These named individuals have full capacity to act on your behalf if and when the situation calls for it, often being responsible for end-of-life decisions, taxes, and more.
Trusts are a way to manage your assets while you are alive. Revocable trusts allow for individuals to have more control over trust assets while simultaneously taking advantage of the other benefits trusts have to offer.
Medical Care Directive
Both living wills and medical powers of attorney help secure your end-of-life wishes should you find yourself unable to make the decisions on your own. These are papers dealing with matters such as the type (if any) of palliative care you would like to receive and your wishes regarding life support.
Be Mindful of Minors (and dependent adults)
While it may seem morbid at first, when you are developing an estate plan and still have minor children or dependent adults, you need to make allowances for them in the case of your death.
Making sure you make the proper allowances for dependents ensures they receive the care they depend on even if you are not around to provide it. This provision is especially important when dealing with adult children with special needs, many of whom need stable, long-term care to allow them to live comfortable lives.
Counting Assets Accurately
A Will, Living Trust, or any other estate planning document is simply an assurance that others disburse your assets as per your wishes. Completing such a task necessitates accurate records of all your assets to be most effective. While not a complete list of every asset you can name, some major categories include:
- Land and Real Estate
- Cars, antiques, and other valuable assets
- Personal possessions
- Liquid assets, such as money held in bank accounts
- Retirement accounts
- Life insurance plans
- Health Savings Accounts
- Ownership of businesses
An effective estate plan will take all the above into account and potentially more. Once you decide how you want disbursements made, and to whom, you can develop the right forms of documentation to meet those needs.
Keep Your Legal Documents Up-to-Date
When you make your Will, Trust, or any other estate planning document, understand that it reflects your assets and wishes at the time of writing. As time goes on, sometimes you experience significant changes that would require altering your estate planning documents.
To ensure your estate plan is relevant to your current situation, review your paperwork after major life changes in health, finances, and even marriage.
If you have existing documents but haven’t gone through any significant changes recently, it is still wise to review your estate plan every couple of years to catch anything you may have missed. Sometimes even a small change can make all the difference down the road.
Understand Tax Responsibilities
When you create an estate plan, how you leave your assets behind can greatly affect your loved ones— do it incorrectly and they might be responsible for unexpected taxes. This can make the inheritance process tiresome.
For the reasons mentioned above, it’s essential to speak with an attorney who can explain some of the tax ramifications of leaving assets to loved ones.
Always Use an Estate Planning Attorney
As you can see from the above list, an estate plan is an intricate machine of moving parts. Using an attorney rather than doing this yourself makes a lot of sense. Not only is the process faster, a good attorney might know of exceptions and documentation that can help you better reach your goals.
Ready to speak with an attorney? Make an appointment with the Law Offices of Paula Hannah, PLC.