Is Your Estate Plan on Track?
An estate plan fills three specific roles that otherwise cause confusion and even litigation after a person’s death:
1. It documents your end-of-life healthcare decisions that family members may otherwise agonize and argue over.
2. It distributes your hard-earned money and assets how and to whom you want, rather than by state laws of succession.
3. It avoids the probate process to the greatest degree possible, saving your family from legal fees, time, and anxiety.
Some documents will be present in every basic estate plan: a healthcare directive, a power of attorney, and a will (often accompanied by a revocable living trust). Though their purposes are straightforward, the laboratory of democracy in the United States means that each state has its own unique laws for estate planning and inheritance. An expert estate planning attorney can help you to avoid pitfalls and work efficiently to plan for you and your family’s future.
It’s worth familiarizing yourself with those common planning documents and processes.
A power of attorney is a document naming an individual you authorize to make financial decisions for you when you are not capable of making them for yourself. This could be from mental incapacity, coma, or otherwise.
A healthcare proxy is essentially a power of attorney for medical decisions. It also serves as a place for you to document specific decisions about your own care that you can foresee, such as end-of-life concerns. Without a healthcare proxy or a power of attorney, questions of what should be done with your finances or medical decisions may require the intervention of the courts to name a representative for you, which can be expensive and slow.
Probate is a legal process in which the court approves a plan for the distribution of your assets and notifies creditors so that they have a chance to collect on debts. The more complicated the probate process, the more expensive and lengthy it becomes, and the more it puts a burden on your family. It can take months, or even drag out to over a year depending on the complexity of the case, the court’s backlog, or disputes among heirs.
Probate can be avoided either mostly or entirely with careful use of estate planning. Certain assets do not pass through probate, avoiding the headache and expense. An experienced attorney can help you come up with a plan to name beneficiaries on joint accounts, pass title to real estate assets, or set up trusts to bypass probate.
It’s important to name contingent (alternative) beneficiaries for accounts, trusts, and retirement assets (401(k)s, IRAs) in case a named beneficiary passes before you do.
The designation of a potential guardian for minor children is a critical concern for those with young kids. In most states, this will be covered in your last will and testament, and it’s important to include because otherwise, your children will have a guardian appointed by the court, often from family but not necessarily the individual you would otherwise choose.
It’s important to review your estate plan every few years and at any major life events, such as births, adoptions, deaths, marriages, or divorces.
No matter the level of planning you wish to have, don’t leave your family with the added concern over guessing at your wishes when you pass. Set up at least the basic documents so your intentions are clear, and give them some measure of peace.
Reference: Investopedia (October 17, 2018) “How to Get Your Estate Plan on Track”