No one enjoys talking about estate planning because most people do not want to talk about death or becoming disabled. And although not everyone will face a disability during their lifetime, everyone will eventually face death. Having an updated estate plan in place is an important piece of your overall financial well-being.
For most people, estate planning means making decisions about the way you want your affairs handled when you can no longer make those decisions. If you are a member of the high-net-worth class, estate planning also ensures your wealth will be passed onto your kids and grandkids in the best way.
Make Estate Planning Decisions Ahead of Time
If you make decisions about your estate before something happens to you, you can guarantee those decisions are made with a clear mind, and it will reduce the burden on your loved ones in the event of your death or illness. It's not a daunting process and requires only a few documents. Meeting with a qualified estate planning attorney to get these documents drafted will give you confidence it was done properly.
Here are the primary documents you'll need when completing your estate planning:
Last Will and Testament
Most of us need a will, often referred to as a last will and testament. This is the legal document that expresses how you want your property to be distributed when you pass away. It also names the executor of your estate, or the person you want to assume the management of your estate until it is completely distributed. A will is especially important if you have minor children because it’s the document where you name a guardian for them if something were to happen to you. (For related reading, see: How to Choose the Right Executor for Your Estate.)
A Trust for Certain Circumstances
Not everyone needs a trust. A trust can be necessary when you have special circumstances that go beyond what a will can do. A will is subject to probate and the public record. A trust is not. So, if privacy is an important issue, a trust can be helpful. A trust is also helpful when you have a “blended” family or you want to exert some “control from the grave” over how your assets are distributed.
For example, you might want to leave your grandchildren some money, but not want to give it to them all at once at a young age. A trust can allow for them to receive distributions from your estate upon reaching a certain age (or ages). There are many different types of trusts. This discussion relates to a living trust, which you can change up until the time of death, when it becomes irrevocable. Trusts can be very complicated, so seeking legal advice is recommended.
Power of Attorney
This is the document that allows you to name the person who will make decisions for you when you are no longer able to. This process generally has two parts. You want to name someone who will make your financial decisions and pay your bills, and you want someone who will make your health care decisions if you can’t. Often it will be the same person, but that’s not a requirement. (For related reading, see: Power of Attorney: When You Need One.)
This document lets family members and medical professionals know your wishes when it comes to the level of care you desire when nearing the end of your life. It’s the document that will detail your desires regarding medical treatment. There have been high-profile media cases where family members and spouses have publicly battled about the care a loved one should receive when they can no longer make those decisions for themselves. Most of these situations would not have occurred if the patient in question had had a living will in place.
These documents may be named differently or be prepared in combination depending on your individual circumstances, where you live and the attorney you work with. Completing your estate planning will give you peace of mind. Everyone has to make these decisions eventually, and it's better to make them yourself while you are able.
(For more from this author, see: It's Always the Right Time for End-of-Life Planning.)