What is an Estate Plan?
What is an Estate Plan?
By Laura Wheeles
Some of the most common questions that the attorneys in our office receive are: What is an estate plan and how much money do you need to have to create an estate plan?
An estate plan is a set of documents drawn up to manage your assets during your lifetime and in the event of your death. There is no amount of money too minimal or expansive for an estate plan. Every good estate plan should be custom-tailored to the amount of assets that a person owns and the goals that a person has for those assets: both during lifetime and upon passing. Documents that are typically found in an estate plan include: wills, power of attorneys, healthcare directives, and trust documents.
Wills
A will is a document with which most people are familiar. A will is a legal document that appoints a personal representative for your estate upon your passing – typically a spouse, family member, or trusted friend – and designates how your personal representative should distribute your assets to your heirs and beneficiaries.
Contrary to popular belief, a will does not avoid probate. Instead, it serves as a guide for how assets are to be distributed upon your passing.
Power of Attorney
A power of attorney is a document that grants a person of your choosing the right to make financial decisions on your behalf. There are several types of power of attorney options:
General Power of Attorney: allows your appointed agent to sign documents and make decisions on your behalf. A general power of attorney takes effect at the time of signing but lasts only up to the point of incapacity. Once you are incapacitated, your agent is no longer allowed to act on your behalf.
General Durable Power of Attorney: allows your agent to sign documents and make decisions on your behalf – just as the general power of attorney. However, it takes effect at the time of signing and continues to be in effect in the event you are incapacitated.
Durable Power of Attorney: only takes effect in the event that you are incapacitated. Once you are deemed incapacitated – typically by a physician – your designated power of attorney will be able to sign documents and make decisions on your behalf.
Limited Power of Attorney: starts whenever you choose and ends whenever you choose. Your agent is able to control only what is set forth in the document and nothing further. It is entirely a document of your own making. This is an ideal option for those who deploy for long periods of time or who have spouses in the military who are deploying for long periods of time.
Power of attorneys are useful for many people for many different reasons. Some of these reasons may include:
Having or anticipating having health issues that may potentially lead to incapacitation
A spouse being absent or deployed for a prolonged period of time
Managing medical and/or financial decisions growing impossible to do on one’s own (typically the elderly or those with a disability)
Advanced Healthcare Directive
Advanced healthcare directives are created to establish your healthcare wishes in the event that you are unconscious, incapacitated, or otherwise unable to convey your wishes at the end of life. Advanced healthcare directives are often a very difficult thing to contemplate, as you are forced to consider worst-case scenarios and plan for them as though they will become real. Though this is not something any of us want to contemplate, it is important for two major reasons: (1) it will guarantee that, should the worst happen, your wishes will be followed, and (2) it will take the burden of having to make these decisions for you off of your loved ones.
Advanced healthcare directives will also allow you to establish a healthcare agent, who will be able to make medical decisions on your behalf if you are unable to do so.
Trusts
A trust is a legal entity that may be created for the purpose of holding and distributing the assets of your estate. A trust is useful in several ways. First, any assets put into a trust will not need to go through probate. Second, depending on how it is drafted, a trust may be able to protect your assets from creditor or nursing home claims after a five-year lookback period. Third, a trust allows you to control your assets after death. For example, a trust can be set up for a minor child until they reach a specific age. Finally, a trust allows you to create a legacy that your family will enjoy for decades to come.
Overall, an estate plan does not require any set amount of assets for it to be worthwhile. Similarly, no one needs to wait until a certain point in their lives to get stated on an estate plan. Here, at the Boppre Law Firm, we believe that everyone over the age of eighteen – no matter how many assets they own – should have an estate plan. A good estate plan will evolve to accommodate your growth over the years but will always provide peace of mind throughout your day-to-day life.
If you have any questions about estate plans or want to get started on yours, feel free to give us a call at the Boppre Law Firm!