Estate planning is important because it gives you control. It allows you to make important decisions regarding how your estate will be handled and who rightfully receives your property when you die. It also helps you save on taxes, court costs, and attorneys’ fees. And it allows your loved ones to mourn your loss in comfort without the added worry and burden of sorting out your finances.
All estate plans should include the following:
- A durable power of attorney — to manage your property while you’re alive should you become incapacitated or too ill to do so yourself
- A Last Will and Testament document — to ensure the distribution of your property is carried out legally and according to your wishes after you die
- A living trust — to hold assets from young beneficiaries until you feel they’re mature enough to manage their own affairs
The medical directive includes a variety of documents, depending on your state’s laws and your preferences. Forms may include a health care proxy, a durable power of attorney for health care, a living will, and medical instructions.
The health care proxy and a durable power of attorney for health care designate someone you choose to make health care decisions for you should you become unable to do so yourself. A living will instructs your health care provider to withdraw life support if you are terminally ill or in a vegetative state.
Wills & Trusts
The will is a legally-binding statement directing who will receive the deceased’s property at death. It also appoints a legal representative to carry out the person’s wishes. However, the will covers only probate property. Many types of property or forms of ownership pass outside of probate. Jointly-owned property, property in trust, life insurance proceeds, and property with a named beneficiary, such as IRAs or 401(k) plans, all pass outside of probate.
A trust is a legal arrangement in which one person (or an institution, such as a bank or law firm), called a trustee holds legal title to property for another person, called a beneficiary. The trust instrument states the rules or instructions under which the trustee operates. Trusts have one set of beneficiaries while those beneficiaries are alive and another set of beneficiaries (often the children of the first beneficiaries) who begin to benefit only after the first group has died.
The greatest reason to establish a trust is to avoid probate. If your trust terminates with your death, any property in the trust prior to your death passes immediately to your beneficiaries according to the terms of the trust without requiring probate. This hassle-reducing process can save your beneficiaries time and money and can result in tax advantages both for you and your beneficiaries. Unlike wills, trusts are private documents. Only those who have a direct interest in the trust need know of its assets and distribution.
Trusts fall into two general categories: testamentary and inter vivos. A testamentary trust is one created by your will, and it does not come into existence until you die. An inter vivos trust starts during your lifetime; you create it now and it exists during your life. There are two kinds of inter vivos trusts: revocable and irrevocable.
Revocable trusts are often called living trusts. With a revocable trust, you maintain complete control over the trust and may amend, revoke, or terminate the trust at any time. This means you can take back the funds you put into the trust or change the trust’s terms. In contrast, you cannot change or amend an irrevocable trust. Any property placed into the trust may only be distributed by the trustee as provided for in the trust document itself.
Source: Alternative For Seniors