A look at what an Estate is, where the planning comes in, the documents that are involved, and what each document does. Just what is Estate Planning?
An Explanation of Estate Planning
You hear the terms: "Estate Plan", "Will", "Power of Attorney" and "Trust" thrown around like they are commonly understood, but the truth is they are not. What do these terms really mean and why are the documents they refer to so important for YOU?
What is an Estate Plan? - Your "Estate" includes all assets held in your name (ex: home, car, boat, checking and saving accounts, stock and retirement accounts). Ideally, you should plan ahead and indicate what you want to happen to your assets when you pass and you do that through an Estate Plan.
What is a Will? - A Will indicates how your Estate should be distributed and who is in charge of making sure your wishes are followed (the person in charge is also known as your Executor). If you have minor children you can also nominate someone to care for them (a Guardian). Without a Will, State law controls how an Estate will be distributed and who will care for any minor children. However, just having a Will does NOT necessarily avoid Court supervision, also called Probate. Probate can be an expensive, frustrating, and time-consuming process where the Court transfers ownership to the appropriate individuals.
What is one way you can avoid Probate? By having a Trust.
What is a Trust? - A Trust is a legal document where you put a Trustee in charge of distributing to your Beneficiaries, the persons who will benefit from the Trust. Assets held in a Trust can be distributed without Court supervision (a.k.a. Probate). There are benefits such as tax advantages and options for controlling the ages that distributions will occur that are not otherwise available in a Will. During your life you can change your Revocable Living Trust as you wish and continue to add and remove assets.
Just protecting your heirs is not enough! You need to protect yourself too.
What are the Powers of Attorney?
What are the Powers of Attorney? - The Powers of Attorney take effect during your life if you suffer a disability and cannot make your own decisions. They refer to two documents:
1.) Healthcare and 2.) Property Powers of Attorney. In these documents you indicate your wishes and appoint an "Agent" to make medical and/or financial decisions for you. Without the Power of Attorney documents, if you are unable to make your own decisions, the State or a loved one will need to be appointed your "Guardian" through the court to make decisions for you.
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