Most people prefer not to discuss the issue of estate planning. Let’s face it, there are certainly less morbid topics to talk about, however, this is perhaps one the most neglected and often misunderstood personal finance areas out there. Knowing the basics of what some of the estate documents can do for you and having a good plan in place could potentially save hundreds of thousands of dollars in taxes and reduce stress for your loved ones.
Estate laws are constantly changing, so it is important to contact an experienced estate planning attorney before you do anything. Having an idea of what these documents do before you meet will be valuable. Here are seven documents you should consider including in your estate plan:
At the very least everyone should have a will. It describes whom your assets should be given (i.e. – my stamp collection goes to cousin Tommy). If you have minor children, your will can name a guardian for them as well. The downside to the will is that your assets will still go through probate, which is a lengthy and expensive process where the courts determine the validity of and interpret your will. Having beneficiaries listed on your accounts will help to avoid probate for those items, but for others like your furnishing in your house etc. those will head to probate.
Revocable Living Trust
This document serves to avoid probate. You still retain control over your assets and can provide various instructions to distribute your assets. (i.e. Little Johnny can’t receive money til he’s 25 because you think he’ll blow it on big screen TVs and video games)
Remember the controversial Terry Schiavo case? Terry’s parents wanted to keep her alive and the husband didn’t want to see her suffer any longer. What a living will does is make the choice for your family before you get to a point where you can no longer make decisions on your own. Many people think “I never want to be hooked up to machines to prolong my life.” This document provides instruction on how you would like to handle the issue of life support. This is also known as a “physicians directive”.
This document basically ensures all of your assets pass through your trust if you have one so they can be handled the way you want and can still avoid probate. This is basically a clause in your will that ensures your assets “pour over” into your trust.
Health Care Power of Attorney
This empowers a loved one whom you trust to make health care decisions for you should you be unable to do so. No matter where you stand on the Terry Schiavo case, this document could have saved the family a lot of fighting had there been something like this in place.
Durable Special Powers of Attorney
This basically allows someone to complete specific actions for you should you be unavailable or unable to do so because of medical reasons or other situations. Durable just means that it will continue in or take effect upon the event that you become mentally incapacitated.
Under the HIPAA law, your health and medical information is considered private and sensitive. Medical staff are required to keep your information confidential, which means that in the event that something happens to you, your doctors will not be able to tell your loved ones too much information. The HIPAA waiver allows the hospital or medical staff to release medical and health-related information to someone you love.
This list should provide you with a basic grasp of what you might need for a proper estate plan. Again, it’s important to seek out a qualified estate planning attorney when looking to create your end-of-life plans. What are your thoughts, is there anything you would include or not include in your own plans?