What is Estate Planning and Why Is it Important for You?
Estate planning involves having an organized approach to managing ones assets while alive and disposing of them when one passes away. It is often an overlooked aspect of life for many people. Estate planning is important to have in place to pay bills and manage your life in the event of incapacity. It is also important in order to be assured that your assets are used after death in a manner in which you intend.
The basics of estate planning involve essentially three documents. Wills are the instruments that become effective after one passes away. A testator is the person making the will. An executor or executrix is the person named to essentially manage the will and see that the testator’s wishes are carried out as set for in the will. Beneficiaries are the people who will be the recipients of what the testator is leaving. A will may also designate a guardian for any minor children that survive the testator. Likewise, a will may also designate a trustee to manage the income for any minor children until they become adults.
An healthcare power of attorney is another document that is included in a basic estate plan. This legal document instructs what actions should be taken should they are unable to make decisions themselves due to illness or incapacity. The power of attorney generally will have provisions in it that designate what treatments they are willing to accept or it may preclude other types of treatments. This is differentiated from a living will which states that if the person is suffering from an incurable, terminal disease that they are not to receive life-sustaining measures that only prolong the dying process. It is not uncommon for this measure to be referred to as instructions for the attending physician to “pull the plug”.
Lastly a financial or durable power of attorney (“POA”) is the third document that generally makes up a basic estate plan. The general POA authorizes a designated individual referred to as an agent to make financial decisions and manage the persons affairs in the even they become incapacitated. The agent essentially acts in the place of the person they are acting on behalf of.
Wills, living wills, and power of attorney documents are generally not overly expensive and can provide peace of mind when in place. Trusts are another form of estate planning documents that can assist with avoiding probate.