Life is unpredictable – sudden illness, unexpected death – regardless of age. To be prepared for the unexpected, you should have an Estate Plan in place.
What is an Estate Plan?
An Estate Plan is a series of legal documents that manages and disposes your assets when you pass or become unable to make your own decisions. These documents are a Will, Trust, Power of Attorney, and Health Care Proxy. Let’s take a look at each.
Last Will and Testament
This is the chief part of an Estate Plan. It names a person, called an executor, which you choose to carry out your final wishes upon death as to what to do with your assets. The Will spells out who gets what. The Will goes through a Probate Court process that oversees the executor and makes sure the instructions specified are carried out.
If you die without a Will, it is known as intestate. In this case, the state becomes the executor of the estate and decides the disposition of all assets. Family members or heirs have no say in the matter. This can lead to litigation and feuding among relatives and family.
A Trust is an arrangement where a third party, known as a trustee that you appoint, holds assets on behalf of a person – the beneficiary – you choose. Typically, Trusts do not go through probate which avoids most estate taxes unlike assets distributed through a Will.
You can have a Revocable Trust that gives you access to your assets while you’re alive and still allows you to pass the remaining assets to your beneficiary. An Irrevocable Trust takes all your assets out of the estate and avoid probate and taxes. But, under this Trust, you no longer have control of the assets.
There are also Trusts designating charities, a surviving spouse, and grandchildren as beneficiaries
Power of Attorney
You appoint a person whom you trust as your attorney-in-fact that will make decisions on your behalf if you cannot such as due to illness. There are four types of Power of Attorney: general, durable, limited, and springing. Each has a certain level of power. The attorney-in-fact can sign documents, pay your bills, and control your finances.
Health Care Proxy
This allows you to appoint someone to act as your agent to make health care decisions for you if you become incapacitated. This person will carry out your health care wishes regarding treatment. If you become able to make your own decisions, the proxy is no longer in effect.
Having these important Estate Plans in place is imperative to control your financial assets, property, and health care wishes. Contact us at skb-law.com and let us help you prepare your Estate Plan.