One of the most common reasons people give for putting off estate planning is that it’s too complicated and time consuming. While this may be true for wealthy individuals, for most of us, estate planning need not be all that complicated.
That having been said, everyone needs the following five pillars of estate planning:
- Power of Attorney
- Health Care or Medical Directive
- Beneficiary Designations
Your Will likely will be the foundation document of your estate plan. In it, you name the various people and entities you want to inherit from you and the items or amounts of their respective bequests.
If you die without a Will, the intestacy laws of your state will determine who gets which portions of the value of your assets. You will have no control over this distribution, and it may not reflect your wishes.
Asset distributions are not the only things you can do with a Will. One of your Will’s most important functions if you have young children is it allows you to name who you want to act as guardians for your kids if you die before they reach their respective ages of majority.
You likely will need one or more trusts to compliment your Will. Why? Because while your will names the who and what, trusts specify the how. For instance, while you can designate the guardian of your minor children in your Will, you cannot leave bequests to them. State laws prohibit children under a certain age, usually 18 or 21, from owning property in their own name. A trust solves this dilemma.
Each trust is composed of the following three groups:
- Grantor, i.e., you
- Beneficiary, i.e., the person or persons who the trust benefits
- Trustee, i.e., the person or entity that will manage the trust’s assets and distribute them to the beneficiary
Common types of trusts include:
- Special needs trust benefitting your disabled child or other family member
- Charitable trust benefitting your church, alma mater, favorite charity, etc.
- Spendthrift trust benefitting someone who makes unwise financial decisions
- Pet trust benefitting your dog, cat or other pet(s)
3. Power of Attorney
A power of attorney is a document wherein you designate someone to make decisions for you if you become too ill or incapacitated to make them for yourself. People generally sign two types of powers of attorney, one covering health care decisions and the other covering financial decisions.
4. Health Care or Medical Directive
Your health care or medical directive lists which medical treatments and interventions you want and don’t want. This list can be as lengthy as you wish, and may include your preferences for or against the following:
- Cardiopulmonary resuscitation (CPR)
- Mechanical breathing
- Tube feeding
- Any other “extraordinary” life-preserving treatment
5. Beneficiary Designations
The fifth pillar of even the simplest estate plan is beneficiary designations. Many of your assets, including the following, require beneficiary designations:
- Life insurance policies
- Employer-sponsored retirement accounts
- Individual retirement accounts
- Executive deferred compensation plans
- Stock options and restricted stock
In addition, you should place a payable-on-death (POD) designation on any bank or other account you own in your sole name. You should likewise place a transfer-on-death (TOD) designation on the title of any vehicle you own in your sole name.
Whatever your estate planning needs and objectives may be, AmericiEstate Legal Plan, Inc. can help you achieve them while streamlining the process and making it less time consuming and expensive.