Dispose of assets upon death, plan for incapacity during life
Estate planning is the process of structuring a formal plan for disposal of your assets upon death and planning for an incapacity during life. If you have underage children, a third purpose of estate planning is to set guardians in place for those children if both you and the other parent pass away.
The four main documents in an estate plan
A Will
A will is a document that passes your assets appropriately upon death. More specifically, is a set of instructions for the court as assets end up in probate. If your assets go to court, the will outlines to whom your assets should go.
A will is also where guardianship is set forth if you have minor children.
A Trust
A trust is a document that passes assets to heirs seamlessly, without the need of going to court. A trust also gives you more control in determining when your heirs inherit the assets.
When you have a trust, the will acts as a failsafe that is used to kick assets out of court and push them into your trust, allowing your trust to deal with the assets privately.
So the will and trust are the documents that pass your assets upon death. Let’s talk briefly about the incapacity documents.
Power of Attorney – Finances
Attorney for finances allows a person to step into your shoes financially so they can access your accounts and pay bills. This is the document we see missing most often when we review older or more generic estate plans. The power of attorney for finances would take over these responsibilities in the event you became incapacitated and could not make these decisions for yourself.
Advanced Directive
The final piece of an estate plan is the advance directive. This document may be known by different names in different states. This could be the medical directive, power of attorney for medical care or other names, but the Advanced Directive allows the agent you assign to be in charge to make medical decisions for you in the event you cannot make them for yourself because you are incapacitated.
A Complete Estate Plan
These four documents ensure that you and your decisions are fulfilled while you are alive and incapacitated (Power of Attorney & Advanced Directive) as well as ensuring your desires are fulfilled in the event you pass away (Will & Trust).
Estate plans can be simple, or they can be incredibly complex.
In general, if you are on your first marriage with relatively straightforward accounts and assets, an estate plan will not cost you much.
If you are on a second (or more) marriage with several kids from different families and many complex assets, an estate plan may cost more, but becomes even more important in clearly outlining your instructions for your heirs and removing future conflicts.
