Many people misunderstand estate planning. In the popular imagination, it often exists as a very elite, niche field that only very wealthy people need to worry about. However, that couldn’t be any farther from the truth.
In reality, estate planning is for everyone. You don’t have to be very wealthy, or wealthy at all, to pursue estate planning. Everyone is encouraged to do at least some form of estate planning, no matter what their assets look like.
What is Estate Planning?
Estate planning simply refers to clearly stating your wishes when it comes to:
- What happens to you if you become incapacitated and cannot advocate for yourself;
- What happens to your assets after you die; and
- What happens to your children or anyone for whom you are a guardian after you die.
What are Assets?
The term “assets” refers to all the property you own. This includes, but is not limited to, real estate properties. It also includes:
- All cash, stock, bonds, investments, savings, retirement accounts, and insurance policies
- Any physical possessions that you personally own (including cars and other vehicles, land, homes, clothing, jewelry, heirlooms, collections, and other personal effects)
What are the Essential Parts of an Estate Plan? What do They Do?
Each estate plan is specific to the estate in question. Some estate plans require more documents and legal structures than others. However, most estate plans include several key legal structures to protect the wishes of the estate owner.
Wills and/or Trusts: Wills and trusts are two of the most common types of estate planning documents. Whether a person needs a will or a trust depends on the estate in question, but some people have both.
A will primarily states what you want to happen to your property/assets after you die. It can also be used to name an executor of your estate (someone who will be responsible for paying off your taxes and debts and distributing your remaining assets), as well as guardians for your minor and/or disabled children. To execute a will, you must enter into a complex, often prolonged legal process called probate. This process can be very expensive and onerous.
A trust functions in a similar way to a will, with several differences. The main difference is that trusts do not have to go through probate, which can save your loved ones time and money. Many people set up trusts specifically to avoid probate. Trusts do tend to be more complex and do not name guardians for minor/disabled children.
Power of Attorney: Power of Attorney (POA) gives someone the right to act on your behalf if you are deemed medically unable to do so yourself. Giving someone power of attorney allows them to make legal and financial decisions as if they were you (in situations where you cannot do so yourself). Many married couples set up reciprocal power of attorney for one another, but power of attorney can be given to anyone you truly trust.
Healthcare Power of Attorney: A healthcare power of attorney (HCPA) is like a power of attorney but only in one specific area. Someone who is given HCPA is able to make medical and healthcare decisions on your behalf, including whether to continue or cut off life support. Like standard power of attorney, healthcare power of attorney should only be given to someone you truly trust.
Trustee/Beneficiary Designations and Guardianship Designations: If your will and/or trust does not already include these designations, you need to draft a separate document that names:
- Your Trustees/Executors: The person responsible for executing your will or trust
- Your Beneficiaries: The person or people who will receive each of your assets
- Your Designated Guardians: If you have minor and/or disabled children, the designated guardian is the person or people to whom you entrust their care. A guardianship designation can include specific instructions on how your children should be raised.
- Why Do We Need Estate Planning And What Happens If We Don’t Plan For What’s Going To Happen After We Die or Even During Our Lifetime?
- If I Have A Will As Part Of My Estate Planning Documents, Do I Still Need A Trust? Is One Better Than The Other? Are These Supporting Documents?
- How Often Should Someone Review And Update Estate Planning Documents? What Life Changes Would Trigger A Review?
- What Are Some Of The Most Common Types Of Trusts And Their Purposes?
- Can I Ever Change The Terms Of My Trust?
- What Is A Power Of Attorney And Do I Need One Or More Than One?
If you die without any estate planning documentation, your estate will enter the probate process and your assets will be distributed according to the standing laws of your state. Furthermore, if you become medically incapacitated and do not have a power of attorney or healthcare power of attorney, your loved ones may not be able to advocate effectively on your behalf. This is true if you have 100 dollars in assets or 100 billion dollars in assets.
As you can see, estate planning is very important for anyone who wants a say over what happens to their assets after their death, as well as anyone who wants a say in what happens if they are medically incapacitated. Estate plans contain some incredibly important decisions that can literally become matters of life or death. For that reason, it is essential to seek out an experienced, knowledgeable estate planning attorney to help you make your estate plans official.
In San Francisco, CA, Estate Planning Attorney Elizabeth Aron is here to help. Attorney Aron is a passionate advocate for her clients. She has the skill, knowledge, and experience to help you ensure that your wishes about your medical care and the distribution of your assets are respected and followed through.
If you are considering making an estate plan in the San Francisco, CA area, don’t wait. Call Estate Planning Attorney Elizabeth Aron at (415) 570-9809 for a free consultation on your case today.
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