Estate planning isn’t just for older people, couples with children, or individuals with a lot of financial wealth. Single people, young adults, and those with a modest income can also benefit from estate planning. As a will and trust lawyer, I believe there are five essential items that should be considered by every adult, regardless of their age, marital status, or financial means.
A will or trust
Wills and trusts are the foundation of an estate plan. A will ensures that your assets are distributed after death according to your wishes, and a trust adds an extra layer of protection when it comes to safeguarding and controlling those assets. A trust can also provide tax or asset protection benefits, depending on the type of trust that is used. It’s important to remember that wills and trusts should be tailored to meet your specific needs, and that’s the reason why many “generic” or DIY documents found online do not work for families in the long run. Working with an estate planning attorney is the best way to make sure that your documents are in compliance with state and federal laws, thus avoiding certain liabilities and limiting the potential for legal challenges.
Durable power of attorney
While most estate planning documents go into effect upon your death, a durable power of attorney works while you’re alive, albeit incapacitated. If you are unable to manage your financial and legal matters for any reason, your appointed agent will have the ability to do so. For example, if you are unconscious due to an accident or sudden illness, your agent would be able to manage your bank accounts to make sure your bills continue to be paid. Once your condition improves and you are able to take matters back into your own hands, the power of attorney can be revoked. If your condition isn’t likely to improve, the power of attorney can remain in effect for as long as it is needed. This is particularly important for families caring for a loved one with dementia or Alzheimer’s.
Healthcare power of attorney
A healthcare power of attorney is similar to a durable power of attorney except for one key difference. As the name suggests, a healthcare power of attorney gives an individual of your choosing the power to make healthcare decisions on your behalf. For some people, this may be the same person who has been given durable power of attorney. However, you’re not required to name the same person in both documents. For example, you may want your spouse or someone close to you to make your healthcare decisions because you’ve had discussions with him or her about your wishes. On the other hand, the person you choose as your financial power of attorney may be a different relative who is financially savvy and wouldn’t mind the responsibilities required of him or her.
Ideally, your estate plan will include some type of insurance that will provide benefits during a crisis. For example, long-term care insurance can cover healthcare and living expenses related to disability or old age, and life insurance will leave money behind for your loved ones after you pass away. Every insurance plan includes a beneficiary designation wherein you will name the person who will receive the funds that are paid out from that insurance. You will also have the option to name a contingent beneficiary, which is someone who is second in line if your initial beneficiary is unable to receive the funds for any reason. Aside from insurance plans, 401k plans and other retirement savings typically include a beneficiary designation as well.
Typically, a guardianship designation is included in your will. A guardianship designation allows you to name someone who can take on the responsibility of raising your minor children upon your death. This should be a person or couple that is both capable and willing to serve in this role. Without a guardianship designation, the decision of who your child(ren) will live with will be made by a judge.
Every adult needs at least some element of planning as described above. If you are ready to learn how to get your own affairs in order, our attorneys are here to guide you toward the solution that is best for your family. To schedule a consultation with a will and trust lawyer, call our law firm.