Far too many are completely unprepared from an estate planning perspective, and there are many reasons for this phenomenon. One of them is confusion-based procrastination. There are those that know that they should put an estate plan in place, but they simply do not know where to begin.
Let’s look at the basic core components that should be included in any well-constructed estate plan.
Asset Transfer Vehicle
The first step is to decide on the optimal asset transfer vehicle. A lot of folks assume that a last will would be the best choice, but in most cases, this is really not true.
There are many tools in the estate planning toolkit, so you should choose the right one for the job. It is difficult for a layperson to understand all of the possibilities, and this is one of the reasons why legal counsel is invaluable.
We obviously cannot provide an explanation of all the different legal devices that can be utilized in this post, but we can touch upon the value of revocable living trusts.
Unless you have a small estate, if you use a will to express your final wishes, it would be admitted to probate. This is a legal process that takes place under the supervision of a court. At minimum, it will typically take the court about nine months to a year to probate an estate.
The inheritors cannot receive any portion of their bequests during probate, and this is one drawback. There are considerable expenses that accumulate, and probate records are available to the general public.
If you use a living trust instead of a last will, all of these negatives would be avoided, because the probate court would not be involved. This is one major benefit, but there are many others, and this is why living trusts are widely utilized.
Advance Directives for Health Care
A significant percentage of medical patients with life threatening conditions become unable to communicate. As a response, your estate plan should include advance directives for health care.
With a living will, you can state your preferences with regard to the use of life-sustaining measures. These would include artificial nutrition and hydration, ventilation, resuscitation, and comfort care medications. You can also record your wishes with regard to potential donor and tissue donations.
Another advance directive that should be part of the plan is a durable power of attorney for health care. With this document, you name someone to make medical decisions on your behalf if it ever becomes necessary. These would be choices that are not covered in the living will.
In order for the agent to have the ability to speak freely with your doctors, you would have to include a HIPAA release form. The acronym stands for the Health Insurance Portability and Accountability Act, and it prevents doctors from releasing information to anyone other than the patient.
Financial Decision Making
You should legally empower representatives to handle your financial affairs if you become incapacitated. Many people suffer from dementia during the latter stages of their lives, so there is a cognitive dimension along with the physical one.
When you have a revocable living trust, you can name a disability trustee to act as the administrator if you become incapacitated at some point in time. To account for property that is not in a trust, you can execute a durable power of attorney for property.
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