Understanding Basic Estate Planning Documents

Estate planning image for landing page (1)Although none of us enjoy thinking about our own demise, we need to prepare financially for what will happen to our money and cherished belongings after we are gone. Unfortunately, not many of us do that. In fact, according to a Caring.com survey, only 4 of 10 American adults even have a will.

If you are among those who haven’t gotten around to doing some estate planning, let’s review why having a plan is such an important piece of your financial puzzle. A well-thought-out estate plan can help:

  • Provide financial security for your family and loved ones
  • Ensure that your property will be preserved and passed on to beneficiaries according to your wishes
  • Mitigate or avoid disputes among family members
  • Minimize estate taxes and other administrative costs to your beneficiaries
  • Ensure competent management of your property in the event of your incapacity
  • Enable you to provide for a charity that is near and dear to your heart

Now, let’s look at some integral documents that you can implement and cross off your estate planning checklist:

Durable power of attorney (POA). This document allows you to authorize someone, called an agent, to handle your financial matters if you become incapacitated. Without a durable POA, your family members would have to institute legal proceedings and request that the court appoint a guardian to carry out these responsibilities. By addressing the possibility of incapacity in advance through a durable POA, you and your family can avoid the expense and potential hassle of having a court-appointed guardian.

Health care documents. A heath care POA authorizes an agent of your choosing to handle your health care decisions the way you want if you become incapacitated. It gives the agent permission to direct health care providers to continue or not continue life support, nutrition, hydration, and more, and to make general health care decisions that may arise.

Some states also authorize a secondary health care document, typically called a living will. It works in conjunction with a health care POA and permits your agent to direct health care providers to carry out your wishes should there be no reasonable hope of your recovery. A living will also serves an important function when your agent or other individuals named in your health care POA cannot decide on your behalf regarding whether to continue life-sustaining treatment.

Will. A will allows you to direct who will receive your property upon your death and under what circumstances. It also enables you to direct the payment of estate administration expenses and taxes and to nominate an executor—an individual whose main duty is to carry out your wishes and instructions—to handle these matters. Even more important, it allows you to designate a guardian for your minor children.

Trust. With a trust, you can plan for the management of assets after your death and during your lifetime if you become incapacitated. A trust can also help minimize federal or state estate taxes.

Trusts come in two general forms: testamentary trusts, which are funded at death, and living trusts, which are funded during your lifetime. Generally revocable, a living trust is the centerpiece of a well-rounded estate plan. When a living trust is established, the process of distributing assets at the time of death will not be subject to the jurisdiction and oversight of the probate court.

Estate planning can be a daunting task. But it can be made easier if you consult a professional who is familiar with the process. Your financial advisor can coordinate efforts with your attorney and tax preparer in creating an estate plan that suits your purposes and that helps achieve your financial and personal goals.

If you have questions about estate planning documents and what you may need to do to protect your family, reach out to me. You can reach me at trent@grinkmeyerleonard.com or you can click the image below to view my calendar and set an appointment.  


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wills, estate planning, estates, money

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