Here’s an idea for you: What happens after we’re gone? Not fun to think about right? But, when you do finally get around to thinking about it, you will come to the realization that this is the one thing we all have in common. Once we cycle through our lives, we are faced with the inevitable crisis of mortality; and so, the question is posed again: What happens after we are no longer a “we”? That, fortunately enough, is something we can try to help you discern with a basic breakdown and introduction to the estate planning process.
Your “estate” is anything and everything you own. Whether it’s property, cars, jewelry, or investments such as stocks, bonds or retirement accounts (solely or jointly owned), your estate—simply put—is everything you posses added up to create your very own “net worth”. It may sound mechanical and scary, but for the majority of individuals who own property or have interests held in investments, it is a process that is not only important, but in our eyes, necessary.
Now, thinking about death is hard for anyone. Several people cite that the reason they haven’t thought about creating an estate plan is because they do not want to think about dying. But, estate planning is a preventative measure someone is suggested to take if they want their assets distributed to the right individuals at the time of passing. It also holds your wishes into account if for some reason you were to lose the ability to make your own financial and healthcare decisions on your own.
Creating an estate plan is recognized in the eyes of the law as structuring the future disposition of your current and projected assets, so when we recommend estate planning, we are also saying the law will see your plan and respect the wishes of your plan. Estate planning can provide support and financial stability to your beneficiaries, it preserves your assets for the future, and it is a safeguard to ensuring your assets are passed down according to your direction and no one else’s.
Now that we have a basic overview of what an estate plan is, let’s delve deeper into exactly what an estate plan entails and what documents you will be interacting with the most:
- A Will: Although this is one of the more well-known parts of an estate plan, it is important to note that the operative word in this sentence is “part.” A last will and testament, although highly important, is only one piece of the estate-planning puzzle. Keep that in mind when you are thinking of creating an entire estate plan for yourself. A last will and testament is, for the most part, exactly what you read in the name. Just as your mental will is designed to act decisively in your best interest, so is your last will and testament; the difference though, is that it is set forth on paper and is recognized as a legal and appropriate action in the eyes of the law. A last will and testament sets forth what you desire to have done with your property and assets at the time of passing. Who will be the beneficiaries to your estate, who will be the guardian of your children and who will you choose to be the executor of your will; that is, who will be the individual who carries out your wishes once you are no longer here?
- Healthcare Power of Attorney: Choosing a healthcare power of attorney is an essential action you must take in your estate plan. A healthcare power of attorney gives someone you trust wholeheartedly the ability to make medical care decisions for you when you are no longer fit to do so. Please keep in mind that this is a huge responsibility for an individual, so make plans to speak to your potential healthcare power of attorney and discuss in-depth what you would like from them in the event that you can no longer make your medical decisions for yourself. Pick someone who will always have your best interest in mind, as well as someone who can handle the weight of such a responsibility.
- A Financial Power of Attorney: A financial power of attorney operates in the same way a healthcare power of attorney does, except they will be handling your finances if you no longer have the ability to. Again, pick an individual who you trust not only handling your finances, but also someone who is responsible enough to pay bills on time, pay taxes and can manage your every day expenses.
- A Trust: Finally, a living trust runs concurrently with your will, and although both have similar functions, a trust and will have differences that make it important to consider both when you are thinking about estate planning. A trust allows you to choose the beneficiaries of your estate and how your assets will be distributed. A trust bypasses the need for probate, which saves time and money and it is a confidential document that shall remain private.
Keep in mind that this is simply a basic overview of what you may encounter when creating an estate plan. If you would like to know more about what the process entails and are even considering creating one, be sure to get in contact with an estate planning attorney who can explain in greater detail the ins and outs and the dos and don’ts of the estate planning process.