While estate planning is not a topic that most people want to think about, having an estate plan is essential. Without an estate plan in place, your family may not understand your wishes regarding how you want your property distributed or even your medical wishes if you become incapacitated. A thorough estate plan covers not only your wishes for property distribution, but your health care and financial needs in the event you cannot make decisions for yourself.
- Will: An estate plan involves more than just a will, but if you don’t have a will that is a good place to start. In the most basic sense, a will outlines how you want your assets divided. When you create a will, you also appoint an executor to carry out your wishes.
- Health care directive: Often called a living will, a health care directive allows you to make health care decisions for yourself if you are unable to do so later one. A health care directive outlines your medical wishes, including end of life care and life support preferences.
- Power of attorney: A power of attorney document designates someone to act on your behalf if you become incapacitated. A power of attorney allows a person to step in and take care of your financial affairs when you cannot. Without a power of attorney, no one can represent you unless a court appoints a conservator or a guardian. That takes time and money and may not be the person you would wish.
- Trust: A trust is a legal entity that can own your assets, while you are living or upon your death. A trust allows you to dictate how your beneficiaries receive the assets you wish to give them. You can dictate how the assets are used or when the assets are distributed, allowing you to protect the assets from being misused. In the arrangement, a person, or an institution such as a bank, takes on the role of a trustee by holding legal title to property for the beneficiary. While not applicable for every situation, a trust can help your heirs avoid probate and offer tax advantages.
Having an estate plan in place provides guidance for your loved ones when you cannot express your wishes. When you have an estate plan, you can dictate your wishes and your loved ones can rest easy knowing they will have guidance when it is most needed.