Nobody likes to think about what might happen to their home, assets, or children when they die. Living in the present allows us to work hard for the things we have and enjoy them to the fullest. Unfortunately, putting off planning what will happen in the event of your death or incapacitation puts your family and assets at risk.
With no estate planning in place, the state will have full control over divvying up your assets in the event of your death. If you suffer a major accident and can no longer make decisions about your property, the court will also be able to decide how your life is managed and how funds are used to care for you. Not only is this process expensive, it’s upsetting for family left behind who have to watch the court system potentially disregard your wishes.
Plan at Any Age or Income Level
Every single person, no matter how affluent or average, has an estate. Any property owned at the time of death or incapacitation is part of your estate and can be divided up amongst family members, charities, or otherwise protected in a trust. Even the care of children can be arranged through estate planning.
Income level simply determines the amount of complexity involved in the estate planning process. For higher income individuals, estate planning can involve multiple trusts, tax planning, and significant legal fees. For low income individuals, planning usually involves lower fees while protecting valuable assets to be passed on to family and saving money in the long run.
Planning out what you want to happen to the property you’ve worked hard for during your life is worth the time, effort, and money you will spend to formally dictate your wishes. A well-planned estate can also be adapted and updated pending any major changes to your property or the addition of children and beneficiaries.
Healthcare Power of Attorney
One of the most important tools of estate planning that can relieve stress from your family is the healthcare power of attorney or healthcare directive. This document identifies the family member you would like to make important medical decisions on your behalf. The healthcare power of attorney ensures that your end of life wishes are carried out by someone you trust.
The healthcare power of attorney can also dictate your care in the event you suffer a medical crisis and are incapacitated. If you can no longer make decisions about your care, the spouse or family member identified in the document will have legal authority to care for you.
The individual you choose to care for you should be someone reliable who shares your beliefs and values regarding your medical care. You can also explicitly state your wishes within the healthcare power of attorney itself to doubly ensure your wishes are met.
Living Trusts and Wills
Just as a healthcare power of attorney designates an individual to carry out your medical wishes, trusts and wills identify your desires and ensure they’re fulfilled when it comes to your possessions.
Completing a will is your opportunity to list the people in your life whom you want to receive your property and assets upon your death. Though wills are legally binding documents, there can be some issues that you’ll want to avoid, such as confusing wording which can lead to contested documents and probate. Make sure you have a professional look over your will to identify any points of contention and streamline the eventual distribution of assets. You’re also encouraged to update your will when major life changes occur.
To avoid high taxes and other potential conflicts with wills, some individuals prefer to place their assets in living trusts. Unlike wills, living trusts hold your assets even after your death. You can still specify who you want to inherit your property and assets while protecting them from court interference and public record. Like a will, your living trust can be updated whenever you see fit.
Durable Financial Power of Attorney
In the event you are found to be mentally incompetent toward the end of your life, the financial power of attorney allows you to name an individual to make financial decisions on your behalf. It’s the best way to empower a loved one or trusted advisor with decision-making abilities regarding real estate, personal property, and day-to-day financial dealings.
The financial power of attorney can be customized to match the level of control that you feel may be necessary should something happen to your mental faculties. You can choose a spouse, sibling, child, or attorney to act on your behalf.
A general power of attorney allows the designated individual to act on all matters, including bank accounts and filing taxes. A limited power of attorney allows the individual to act on pre-specified matters or for a predetermined amount of time.
Taking Action
Make estate planning a priority regardless of your age or income level. You can check with state laws regarding document requirements, but make sure you at least have some form of healthcare directive, durable financial power of attorney, and a will or trust. Some states will require that your documents be notarized or otherwise found legally binding. Protecting your assets and your family’s future is one of the greatest gifts you can give them.