The Four Most Crucial Documents To Have in Your Estate Plan
Your estate plans are a firm, legal method for protecting your family. Putting legal documentation in place to ensure your family is safe and provided for is a terrific way to prove how much you care about them. In the event of anything unfortunate happening to you, in the realms of injury, accident, or illness, these estate plans will help make sure that your assets will go to your family and not to the state.
Here are the four main parts of an estate plan, and what you should know about them.
Last Will and Testament
Your Last Will and Testament governs your possessions and dependents. Whatever your final wishes are regarding their care, this is where you clarify those wishes. This includes the status of your accounts and whatever you own (including business interests). It also addresses custody wishes, in the event that you have dependents who are younger than 18.
You will name a person to be the executor of your estate. This person is responsible for administering your wishes as specified in the documents. The state’s probate court oversees what the executor does, to make sure he or she is following the wishes outlined in your Last Will and Testament.
If you die without a valid Will, then you die “intestate.” If this happens, then the Court will appoint an Administrator of your estate. The state laws determine how to distribute your property and investments, as well as who gets paid first..
Power of Attorney (POA)
Your power of attorney (POA) is a document that authorizes someone else to act on your behalf. . This person you designate, called the “attorney in fact,” can make business, financial, and legal decision for you if you cannot make those decisions.
There are different types of POA documents. A “springing POA” is executed as a legal document, but will not go into effect until you become incapacitated — for example, in the event of a car accident, a severe stroke, or some other kind of event that severely injures you. A “durable POA” takes effect immediately. If you sign a durable POA authorizing your daughter to manage your financial affairs, then she can begin overseeing your bank account immediately. A “financial POA” refers only to managing financial affairs. In many cases, a child working with a financial POA documents will pay bills on behalf of his parent, but cannot sell real estate or liquidate other assets.
Advance Directives (Healthcare Power of Attorney and Living Will)
Your advance directive clarifies what medical treatment you would like, in the event that you cannot communicate with a medical professional. For example, if you fall into a coma, and you have an advance directive document explaining that you consent to being connected to a breathing apparatus and being fed intravenously, then the hospital staff will know that those are your wishes.
Revocable Living Trust
A living (inter vivos) trust, is similar to a Will, but it goes into effect while you are still alive. It is called “revocable” because you can change it as you see fit. As your wishes change, or your circumstances change, you can adjust the living trust accordingly. With a living trust, you transfer your property into a trust, and the trust manages the property as you specify. The primary differences are that a living trust is kept private after your death, and a living trust avoids probate.