You’re never too old to prepare an estate plan. If you have a spouse, children, a home, or financial assets, an estate plan should be part of your portfolio.
An estate plan is much more than simply a will that divides your belongings. A plan like this ensures financial care for your survivors, as well as assigning your assets and possessions to the appropriate people. Also, you can state your end-of-life preferences so that all are aware of what to do should you become seriously ill or near death.
Most importantly, a finished estate plan allows you to enjoy your life with confidence, no matter your age, because you know that in any situation, you have taken care of your finances and your family, without the complications that happen when plans are not put into place ahead of time.
What comprises an estate plan? Read on for a list of the 5 most important estate planning documents.
Estate Planning Documents
According to experts, there are 5 documents within a basic estate plan:
1. Advance Directive
2. Durable Power of Attorney for Health Care
3. Durable Power of Attorney for Financial Matters
4. Living Revocable Trust
These are not the only documents that you can include in an estate plan, but these five ensure your personal care, your plans for distribution and use of your monies, and finally, care for your family and loved ones.
An Advance Directive is a set of documents that indicates what your preferences are for your care if you can’t act on your own. In this set of documents, you will choose a person to make health care decisions for you in the event you can’t make them yourself. Other questions this document answers are:
Do you want resuscitation if you stop breathing and/or your heart stops?
Do you want hospitalization if you are seriously or terminally ill, or remain at home, if possible?
How and who will you pay for your care?
Advance Directives are also known as “Living Wills.” A living will is PART of an advance directive and lists the specific answers to the questions above. A living will is usually employed when someone is terminally ill. An entire Advance Directive package should be put together ahead of any possibility of illness, if possible.
Durable Power of Attorney For Health Care
A durable Power of Attorney (POA) for health care is another type of advance directive. While a living will states your care preferences, the POA for health care designates a person of your choice who will make all health care decisions for you, if you can’t make them on your own.
This person must be comfortable with your wishes and be willing to honor them, even if others in your family disagree.
Most advance directives combine the living will and the POA for health care into one document.
Durable Power of Attorney For Financial Matters
You need a durable Power of Attorney for your financial matters as well. The person you assign will make legal and financial decisions for you if you are unable to act on them yourself. Your POA can buy or sell real estate, take care of banking and bill paying, and make other legal decisions on your behalf.
Your financial POA and health care POA can be the same person, such as a spouse, or two different people. Consider what needs to be decided financially, and add that to the sometimes difficult decisions of end of life care, and decide if it’s best left to more than one person, or two.
Living Revocable Trust
A living revocable trust allows you (the trustee)to place your home and other property into a transferable vehicle that will pass to your successor trustee after you die. You can still control whatever assets you place in your trust while you are still alive, and can make changes at any time.
This differs from a will in that a trust, which is a private document, and takes effect the minute it is signed, does not have to go through the probate process in court upon your death. Rather, the transfer to your successor trustee is seamless after you pass away or become incapacitated. A will does not take effect until you die and is a public document that anyone can see at any time.
But, a traditional will is still needed in a complete estate plan.
Although a living revocable trust is a helpful document for protecting and distributing big-ticket items like your home, a will is necessary to distribute sentimental, yet valuable property, such as jewelry, artwork, or heirlooms. Also, you can use a will to specify your funeral arrangements.
For parents of minor children, a will is a must to appoint legal guardianship for your kids should you die.
It is important to have both a will and a trust in place to cover all the important items and people in your life.
Setting Up Your Estate Planning Documents
Because estate laws vary from state to state and depending on the amount and type of assets you own, you should look into estate planning services for help with the construction of your advance directives, POAs, living trusts, and wills.
An estate planning service will know all the laws that pertain to your situation and the state you live in and will prepare all the documents for you, so all you have to do is add your signature.
Many estate planning services offer a free consultation so you can decide if you will benefit from this type of service. Generally, the more assets you have, the more you will need help from professionals who can help you put your wishes to paper.
The biggest mistake you can make when it comes to your future is to put off the creation of your estate planning documents. Look into estate planning services today, since life and death are both unpredictable. Planning today will give you peace and confidence in the future.
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