Visiting your attorney to get your estate plan done is one New Year's resolution that you should definitely keep. None of us knows whether or when we may find ourselves seriously injured or sick. But if it does happen, you may not be able to speak for yourself. That's why it is so important to prepare your estate planning documents well in advance of emergencies.
Powers of Attorney and Advance Directives
For one, you can prepare for an unforeseen medical emergency with documents known as advance directives. These include a living will and powers of attorney. These documents can prove essential if you've become unable to manage your affairs after a serious injury or illness.
With a medical power of attorney, you can appoint someone you trust to act in your best interest if you need medical care. In a critical medical situation, you may not be able to communicate your wishes. This appointee would have permission to talk to your doctors on your behalf about the treatments you would (or would not) want to receive.
You can also choose a trusted person to handle your financial matters if you become unable to do so. For example, if you have fallen ill, you may want to focus your energy on getting better. You can appoint someone to manage such financial tasks as managing the payment of your bills. This is your durable financial power of attorney.
These estate planning documents are among those that can help prepare you and your family for unexpected life challenges.
Wills and Trusts
If the worst happens, your estate planning documents should contain a list of assets as well as how to locate or access them. Wills and Trusts can prove essential to your heirs, but they have their differences.
A will takes effect only after you have passed away. In essence, it outlines whom you want receiving your possessions upon your death.
Wills are not just about transferring wealth. For instance, if you have a minor child, you can name a guardian for them in your will. Without a will in place, you could risk having the laws of your state make the determinations about how to divide up your property.
A trust is different than a will. It is an arrangement through which an individual (or entity) holds legal title to property for someone else. Trusts, in contrast to wills, become effective as soon as you've created them.
In your estate plan, you can name an individual as your personal representative (executor) or trustee. This person must ensure that your loved ones receive your money and property after you pass away, according to your wishes.
A properly drafted will or trust can save your heirs a great deal of time and money during the estate or trust administration process. In addition, these kinds of documents may also help to prevent potential arguments among family members over your property.
Estate and Trust Administration
If you have a will in place, your executor must then navigate probate to settle your estate. The probate process can sometimes be overwhelming, costly, and time-consuming.
Meanwhile, a trust, if properly set up and funded, will avoid probate.
To close the estate, executors and trustees may be responsible for each of the following:
gathering and evaluating your assets,
filing final tax returns, and
distributing your assets to your loved ones, according to your wishes
Think of your preparedness as offering your loved ones a sort of reprieve. By making your wishes clear in a comprehensive estate plan, you'll be allowing them to focus on coping with their grief.
Peace of Mind
Resolutions are easy to make but much harder to keep. One-third have already failed by the time February rolls around. If you have not set up your estate plan, or if you need to make changes, give me a call or email today. You'll have already completed the first step in achieving your New Year's resolution.
Make sure you have the best and most effective plan in place – before you need it. You can have your estate plan prepared within a few weeks, offering you and your family peace of mind.