What Are a Good Estate Plan’s Essential Elements?
First, a word of caution. A competent attorney should prepare all estate-planning documents. This is not a do-it-yourself project!
That said, there are three essential estate-planning documents you need, regardless of your age, health or wealth:
– Durable power of attorney
– Advanced medical directives
You may require two other documents depending on your particular circumstances:
– Letter of instruction
– Living trust
Durable Power of Attorney
A durable power of attorney (DPOA) document can help protect your property in the event you become physically unable or mentally incapacitated to handle financial matters. If no one is ready to look after your financial affairs when you can’t, your property may be wasted, abused or lost.
A DPOA allows you to authorize someone else to act on your behalf, so he or she can do things like pay everyday expenses, collect benefits, watch over your investments, and file taxes.
Advanced Medical Directives
Advanced medical directives let others know what medical treatment you would want, or allow someone to make medical decisions for you, in case you can’t express your wishes yourself. If you don’t have an advanced medical directive, health-care providers may be forced to prolong your life using artificial means, if necessary. With today’s technology, physicians at times can sustain your physical body for days and weeks (if not months or even years).
Many consider a will the cornerstone of any estate plan. The main purpose of a will is to distribute property to heirs after your death. If you don’t leave a will, disbursements will be made according to state law, which might not be what you would want.
There are two other equally important aspects of a will. First, you can name the person who will manage and settle your estate (the executor). If you do not name someone, the court will appoint an administrator, who might not be someone you would choose. Second, you can name a legal guardian for minor children or dependents with special needs. If you don’t appoint a guardian, the state will appoint one for you.
Letter of Instruction
A letter of instruction is an informal, non-legal document that generally accompanies your will and is used to express your personal thoughts and directions regarding items in the will (or about other things, such as your burial wishes or where to locate other documents). This can be the most helpful document you leave for your family members and your executor. Unlike your will, a letter of instruction remains private. Therefore, it is an opportunity to say the things you would rather not make public.
The primary function of a living trust is typically to avoid probate. This is possible because property in a living trust is not included in the probate estate.
The probate process takes time, and your property generally won’t be distributed until the process is completed. Transferring property through a living trust provides for a quicker, almost immediate transfer of assets to those who need them.
Avoiding probate may also be desirable if you’re concerned about privacy. Probated documents (e.g., will, inventory) become a matter of public record. Generally, a trust document does not.
This commentary originally appeared August 29 on DentalTown.com
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