|Posted on April 11, 2014 at 10:35 AM|
Estate planning involves putting in place arrangements for dealing with an individual’s property when he or she dies or becomes incapacitated or mentally incompetent. More broadly, estate planning also involves putting in place arrangements concerning an individual’s personal and medical care in the event he or she may become unable to handle such care on their own. It’s important to create a basic estate plan regardless of the size of an estate. A basic estate plan normally will include:
• A will, by which a person can give specific property or shares to designated beneficiaries, establish trusts for the surviving spouse or children, name a guardian for minor children, and appoint a personal representative to administer the estate, among other things
• A durable power of attorney, by which a person can designation another individual to manage the property and financial affairs of the person who grants the power of attorney
• A living will, by which a person can state his or her wishes concerning refraining from or withdrawing extraordinary life-sustaining medical care in the event of a terminal condition and such care would only prolong the dying process
• An appointment of health care representative, by which a person can designate another individual to make decisions and grant or withhold consent to medical treatment in the event the person who appoints the health care representative is unable to communicate his or her wishes
For many people, a trust may make sense—either as part of a will (a “testamentary trust”) or as an immediately active trust (a “living trust”).
In addition to a durable power of attorney, living will, and appointment of health care representative, an estate plan based upon a living trust should include the following:
• A revocable trust declaration or agreement
• A “pour-over” will (a will that “pours over” to the trust any property which is not titled in the name of the trust at the death of the person who creates the trust)
After an appropriate estate plan has been chosen and implemented, it should be reviewed and updated on a periodic basis to address major life changes. For example, an estate plan created by a young married couple without any children will be outdated when children are born. Similarly, an estate plan that was drafted for a couple in their late 30s with a modest estate may not be appropriate for that same couple 20 years later with a much larger estate.
Future posts will go into more detail about each of the pieces of a basic estate plan that are described above.
Categories: Estate Planning