Estate Planning 101: The Basics
Estate planning sounds like a major undertaking, but it can be really very simple. Unless you have a large net worth, you can have a very simple estate plan. A one hour meeting with an estate planning attorney can inform you of the right plan to make and set you on a path to achieve your goals to protect your assets and family, directs who gets what after your death, and have your choice as person to make decisions for you and manage your estate.
3 Most Important Components of Every Estate Plan
When people think of estate planning, they often think of a last will and testament. Certainly, that is an important part of any estate plan. But a Will is not the only document you need. A Power of Attorney is arguably as important as a Will. Too many people believe they don’t really need one, until they actually do need one! It’s a document many don’t really appreciate until it’s needed, and then boy are people glad they have them! The third most important component of every estate plan is the Advance Directive for Health Care. This document sets forth your wishes for end of life care as well as designating proxies to make those decisions for you if you are unable to make your own decisions.
There are other documents that may be beneficial for you and your family and that will best fit your needs. What is best for you and your family is something you need to speak with an estate planning attorney about, but these three documents are the core, the most important, documents for every person to have.
Last Will & Testament
A Last Will & Testament sets forth your wishes for your stuff, whether it’s personal property (jewelry, furniture, art, etc.) or real property (personal residence, vacation home, etc). It gives directions and authority to the Personal Representative (a/k/a “Executor”) as to what to do with your stuff, such as selling your house, dividing your personal property, and paying debts. It should also relieve the Personal Representative from filing an inventory and paying a bond – both of which are tedious and a hassle, and required when there is not a will. Your Personal Representative shouldn’t have to ask permission from the Probate Court to do anything with your property unless there is a Will contest or claim filed against the Estate.
Estate Planning When You Have Children
A Last Will & Testament can also name a Guardian for your children should you die with children under the age of 19. This is the person (or persons) who will take in your children and raise them in your place. Be sure you choose wisely here. Your parent or sibling may not be the best person – don’t be afraid to name a friend or other relative.
A Last Will & Testament can contain a trust, or it can “pour over” to a trust. If you have children under 19, you will most likely need a trust, but a trust is good for other reasons as well. When you talk with a licensed attorney about your estate plan, he or she may recommend a trust and if they do, your Last Will & Testament will likely state that your estate “pours over” into the trust to be distributed pursuant to the terms of the trust.
Power of Attorney
Power of Attorney is an incredibly important document to have executed and in effect. It gives your “Agent” the authority to transact business if you are unable to do so yourself. It gives authorization for the person to make decisions about your finances, business, and other legal or financial matters. No matter your age, you need a power of attorney that gives someone authority to talk to financial institutions, insurance companies, utility companies, phone companies, doctors and other medical staff, and generally be able to do anything you can do in the event you are not able to manage your own affairs. There are a number of reasons you may not be able to handle your own affairs: you could be on vacation, on a work trip, in the hospital for extended stay after a car accident or some other unforeseen injury, or you may get dementia or Alzheimer’s.
Like the Will, a Power of Attorney can also name your choice of guardian for your children should you be unable to care for them for a period of time. We don’t like thinking of these things, but should you and your spouse be in a car accident and you are both in the hospital, who will take care of your kids?
Advance Directive for Health Care
Advanced Directive for Health Care is your directive as to your end-of-life health care. It states your wishes and desires if you are terminally ill or injured, or permanently unconscious. This document informs health care professionals and your family as to whether you want to be provided life sustaining treatment (i.e., be hooked up to machines that merely keep you alive with no or very little chance of living if off the machines) and whether you want food and water.
This document can also name someone, known as your “proxy”, to make these decisions for you. Your family needs to know your wishes as to your health care. You will likely name family as your proxy, but even if you don’t, be sure they know what you want or don’t want. If you don’t have this Advanced Directive for Health Care in place, you are placing an incredible burden on your spouse, children, or other family to make a difficult decision about whether to keep you hooked up to machines or not. And, what if your family is at odds? What if they don’t agree? It’s not fair to leave that to your family, when they are experiencing intense emotions of the thought of losing you, when you can so easily execute this Directive while you are living.
Consult with an Estate Planning Lawyer
If you don’t have these documents in place, or the documents you have are more than five years old, talk with an estate planning lawyer in your state. Even if you don’t know who you want to name for all these important roles, talk to an estate planning lawyer. A lawyer can help guide you in making those important decisions.
Are you worried about the cost? Talk to a lawyer to find out what it may cost in your area. The cost often depends on the geographic area in which you live, your net worth (and thus complexity of planning), your wishes for your estate plan, and your attorney’s experience. You may need to get estimates from a few attorneys, but unless you have a large net worth, a simple estate plan (consisting of only the 3 documents mentioned in this blog) shouldn’t cost thousands of dollars. Don’t fear the cost!
What is the Next Step for Your Estate Plan?
As an estate planning attorney whose entire practice is dedicated to helping people make their estate plans, I try to make the process as simple and easy as possible, listening to clients’ needs and goals and advising on best options. Alabama residents are welcome to schedule a consult with me to find out your options for your estate plan.
No representation is made that the quality of legal services to be provided are greater than the quality of legal services provided by other lawyers.