What is Estate Planning?
Estate planning means making a plan for how you want to divide your property after you die. Part of estate planning is deciding in advance who should be in charge of your medical and financial affairs if you are unable to make important decisions for yourself. An estate plan documents stating how you want your property to be distributed after you die. A plan can include any combination of a will, powers of attorney, special deeds for real estate, a set of documents called advance directives, and other estate planning forms.
What is Included in Estate Planning?
1. Wills and Trusts
A will or a trust may sound complicated or expensive—something only rich people have. That is an incorrect assessment. A will or trust should be one of the main components of every estate plan, even if you don’t have substantial assets. Wills ensure property is distributed according to an individual’s wishes (if drafted according to state laws). Some trusts help limit estate taxes or legal challenges. However, simply having a will or trust isn’t enough. The wording of the document is critically important.
A will or trust should be written in a manner consistent with how you’ve bequeathed the assets that pass outside of the will. For example, suppose you’ve already named your sister as a beneficiary on a retirement account or insurance policy (assets that typically pass outside of a will to a named beneficiary). In that case, you don’t want to bequeath the same asset to a second cousin in the will because it could lead to a will contest. Not to mention that both individuals could become bitter toward each other (and you) during a legal battle.
2. Durable Power of Attorney
It’s essential to draft a durable power of attorney (POA), so an agent or a person you assign will act on your behalf when you cannot do so yourself. Absent a power of attorney, a court may be left to decide what happens to your assets if you are found to be mentally incompetent, and the court’s decision may not be what you wanted.
This document can give your agent the power to transact real estate, enter into financial transactions, and make other legal decisions as if they were you. This type of POA is revocable by the principal at a time of their choosing, typically when the principal is deemed to be physically able, mentally competent, or upon death.
In many families, it makes sense for spouses to set up reciprocal powers of attorney. However, it might make more sense in some cases to have another family member, friend, or a trusted advisor who is more financially savvy act as the agent.
3. Beneficiary Designations
As noted earlier, a number of your possessions can pass to your heirs without being dictated in the will (e.g., 401(k) plan assets). This is why it is important to maintain a beneficiary—and a contingent beneficiary—on such an account. Insurance plans should contain a beneficiary and a contingent beneficiary as well because they might also pass outside of a will.
If you don’t name a beneficiary, or if the beneficiary is deceased or unable to serve, a court could be left to decide the fate of your funds. And frankly, a judge who is unaware of your situation, beliefs, or intent is unlikely to make the same decision you would have made.
4. Letter of Intent
A letter of intent is simply a document left to your executor or a beneficiary. The purpose is to define what you want to be done with a particular asset after your death or incapacitation. Some letters of intent also provide funeral details or other special requests.
While such a document may not be valid in the eyes of the law, it helps inform a probate judge of your intentions and may help in the distribution of your assets if the will is deemed invalid for some reason.
5. Healthcare Power of Attorney
A healthcare power of attorney (HCPA) designates another individual (typically a spouse or family member) to make important healthcare decisions on your behalf in the event of incapacity.
If you are considering executing such a document, you should pick someone you trust, who shares your views, and who would likely recommend a course of action you would agree with. After all, this person could literally have your life in their hands.
Finally, a backup agent should also be identified if your initial pick is unavailable or unable to act at the time needed.
6. Guardianship Designations
While many wills or trusts incorporate this clause, some don’t. If you have minor children or consider having kids, picking a guardian is incredibly important and sometimes overlooked. Make sure the individual or couple you choose shares your views, is financially sound, and genuinely willing to raise children. As with all designations, a backup or contingent guardian should also be named.
Absent these designations, a court could rule that your children live with a family member you wouldn’t have selected. And in extreme cases, the court could mandate that your children become wards of the state.
Attorney for Will Preparation Services in Houston
Attorney Christy K. Brown is a seasoned attorney with nearly three decades of experience representing a wide range of clients.
After an initial consultation, Attorney Christy K. Brown will take appropriate action in your case to help you get the results you are looking for. This includes but not limited to gathering evidence, going to trial, and earning a settlement that is appropriate for your specific situation. Reach out to us today to take the first step towards settling your case.
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