WHAT MAKES A WINNING ESTATE PLAN?
Having an estate plan is important. Although it can seem complicated, an insight into the basics can make estate planning easy to understand, and highlight the significance of having a plan in place for yourself and your loved ones.
While the concept of estate planning can appear to be geared toward either the elderly or the extremely wealthy, the reality is every adult should consider creating an estate plan. Young adults and newlyweds need an estate plan just as much as individuals with a multi-generational family.
Likewise, you don’t have to have to be fabulously rich to need an estate plan. In fact, if you own a car or have a checking account, for example, an estate plan is necessary to make sure your assets are handled according to your wishes after you pass or in the event you become incapacitated during your lifetime.
An estate is comprised of all of the property you own, such as houses, land, retirement accounts, investments, vehicles, cash, and more. An estate plan is an arrangement that establishes which people or organizations receive the assets or possessions from your estate after you’ve passed away. It also allows you to name legal guardians for any minor children you have or dependents you provide support to in the event you no longer can support them. Finally, an estate plan provides information and direction for managing your medical care and assets if you become incapacitated and are no longer able to make medical or financial decisions.
The two most common tools used in an estate plan are wills and trusts. A will is a document that specifies how your assets should be administered, to whom, and under what circumstances. A trust is a legal arrangement that holds your assets on behalf of you and/or your beneficiaries.
There are also separate estate planning documents that cover the management of your medical care. A medical power of attorney lets you specify a trusted individual to make healthcare decisions for you in the event you become incapacitated and are unable to do so. A living will allows you to specify your medical preferences, typically for end of life decisions. In some states, an advance healthcare directive covers both a medical power of attorney and a living will. Finally, it is wise to add a HIPAA authorization form to your medical estate planning documents, which designates individuals who can access your medical records and information.
Sooner rather than later! Don’t leave your loved ones guessing about what your wishes are when it comes to your assets, guardians for your children, or long-term healthcare. Having a plan in place not only ensures that your wishes are met, but that your loved ones are provided with directions in carrying out those preferences.
If you don’t have estate planning documents in place, the state you are located in will take over. If you pass away without a will, it is known as dying ‘intestate.’ If you die intestate, your estate is then distributed to beneficiaries as predetermined by the state in which you live. Because the state gets to determine the outcome of your estate, there’s no guarantee that the state’s distribution will reflect your own personal wishes. Plus, the intestacy probate process is fairly slow and can be costly. That’s why it’s so important to have estate planning documents in place – to secure your wishes regarding your assets and dependent guardianship preferences.
Similarly, creating an estate plan is important because it can allow you to provide financial stability to your loved ones. Or, it can provide you with the opportunity to support a favorite charity or organization. Not to mention that estate planning can help minimize certain taxes and expenses after you pass away.
A winning estate plan encompasses many things. First, it accomplishes your specific goals and objectives regarding the distribution of your estate after you pass. For example, whether you want to tailor your estate plan to provide financial support to loved ones, support a favorite charity, or, perhaps, minimize taxes and expenses.
Additionally, a winning estate plan identifies the particular individuals or organizations that you designate to be recipients of your assets. It also specifies the individuals whom you select to be legal guardians of your children or dependents in the event you can no longer care for them. Similarly, a winning estate plan will name the individuals appointed to certain roles, such as your personal representative and medical power of attorney.
Finally, a winning estate plan includes all of the aforementioned asset transfer and medical care documents that fit your situation. Working with an experienced estate planning attorney can provide you with guidance and tailored estate planning documents that meet your needs.
This post was drafted by Faith Kowalski, a law clerk at Baylor Evnen Wolfe & Tannehill, LLP. For more information about estate planning, please call Barry Hemmerling or Gabriella Miller at 402-475-1075.