Many people mistakenly believe that estate planning is only relevant to the elderly or wealthy.
While those demographics should prioritize estate planning, so should everyone else. Estate planning is a must for anyone who wants to protect their assets, spare loved ones from having to shoulder avoidable burdens later on, and ensure their wishes are respected after their death.
Pew Research Center reported late last year that 66% of adults aged 70 and older say they’ve drafted a will. And 32% of adults overall have created a will. While some people are on the ball, too many are dragging their feet and aren’t getting their affairs in order while they still can.
One reason to speak to an estate planning lawyer is that you want to ensure your wishes are honored. If you go about things the wrong way, someone might challenge the legality of your will. If challenges succeed, a judge could choose to do the opposite of what you want. You can reduce the odds of that occurring by getting your ducks in a row and your documents arranged.
Here are five important documents to consider in estate planning so that your wishes are respected and withstand any court challenges should they arise down the road.
1. Last Will and Testament
An estate plan typically includes a last will and testament that conveys a person’s wishes for how their assets should be distributed after their death. So, you’ll want to create this document so that your possessions and property, including money and personal items, are distributed as per your wishes.
The absence of a will results in the distribution of possessions according to state law. This process is known as intestacy, and it takes a long time and causes unnecessary expense, as well as potential conflicts among the deceased’s relatives.
Another advantage of having a last will and testament is that it facilitates making decisions about who will be responsible for the administration of another’s affairs, naming a guardian for children, and addressing the repayment of any outstanding debts or tax liabilities.
It’s worth noting that a last will and testament typically goes through probate, a legal process that validates the document and oversees the distribution of assets. This process can be time-consuming.
2. Power of Attorney (Financial)
A power of attorney for property is a document that grants someone the authority to handle another person’s financial affairs should that person become incapacitated.
Incapacitation may occur for different reasons. The problem is that without this type of document, people have to involve a court in the matter and thus spend a lot of money to obtain the right to make decisions about an incapacitated person’s finances.
Using a power of attorney means saving money since you won’t have to involve lawyers or courts. As a result of creating this type of document, you can choose the person who’ll have the authority to make decisions concerning financial matters on your behalf if you can’t do so.
3. Healthcare Power of Attorney
A healthcare power of attorney, also called a medical proxy, is used to name someone who’ll make medical treatment decisions on behalf of an incapacitated person.
Without this document, it’ll be difficult to resolve medical issues associated with an individual’s incapacity. The reason is that healthcare practitioners are supposed to act in accordance with next-of-kin rules. So, if you’d rather choose someone other than a healthcare provider who chooses on your behalf, ensure you have a healthcare power of attorney.
4. Living Will (Advance Directive)
A living will, or advance directive, is a document that specifies an individual’s medical preferences. Unlike a proxy, a living will outlines preferences concerning end-of-life treatments that are required if an individual becomes unconscious or is in a coma.
Using an advance directive, for instance, you can determine whether you wish to undergo certain types of treatments, including resuscitation, artificial nutrition, or the use of specific medical devices. Outlining preferences for end-of-life treatment helps eliminate disagreements among family members and makes it easier for health care professionals to do their jobs.
5. Trust (If Appropriate)
It’s worth considering whether or not to create a trust document. In general, trusts facilitate the transfer of ownership rights in certain assets to a trustee who should use them for the benefit of a person’s beneficiaries.
Although not everyone needs a trust, there are many situations in which it becomes necessary. Among them are those in which probate should be avoided, increased control over assets is needed, or estate taxes and other costs should be reduced.
All five documents discussed above serve different purposes in an estate plan. In the absence of these documents, loved ones of the deceased may have to struggle with issues. Preparing an estate plan can be one of the best gifts you ever give your loved ones.
