Misconceptions abound when it comes to estate planning. Some people think that only wealthy people need estate plans, while others think an estate plan is complete with a will. However, most people - whether wealthy or not - can benefit from creating comprehensive estate plans.
Although a will is a key component of an estate plan, estate planning can involve the creation of several different documents or legal instruments. Estate plans often include most or all of the following:
• Will: A will gives instructions on how an individual's assets should be distributed upon death. A will also may indicate who should raise any minor children if both parents have passed away.
• Trust: A trust creates a legal structure for holding and managing assets, usually for the benefit of the person creating the trust, but also possibly for the benefit of another person. Trust documents may be drafted so that the trust is created while the individual is living, or upon the individual's passing away.
• Health Care Directive: A health care directive provides instructions and information about an individual's preferred medical treatment, to be used if the individual becomes incapable of making or communicating health-care decisions himself or herself.
• Power of Attorney: A power of attorney gives another person access to and control over an individual's money and financial assets as soon as the document is signed.
Proper estate-planning documents are important for many reasons, including:
• Time and money. With careful estate planning, many estates can avoid the probate process. This both speeds up the distribution process and avoids attorney's fees for the probate. Importantly, proper estate planning also can reduce your estate's tax bill, leaving more money for your beneficiaries.
• You get to decide how your assets go to the people you want to receive them. If you don't have a will stating your wishes, the state will divide your assets according to a statutory one-size-fits-all rule that may not do what you desire. With an estate plan, you can give to those people or organizations you wish by making them beneficiaries of gifts, inheritances and charitable donations.
• With an estate plan in place, you and your loved ones have a pre-arranged plan to follow in times of stress and high emotion, avoiding uncertainty if you should become disabled, need long-term medical care, or pass away.
• You gain peace of mind knowing that your minor children will be taken care of by a person of your choosing if you pass away before your children turn 18 years old.
These are just a few of the ways in which people benefit by proper estate planning. To learn more about your options, contact an experienced estate planning attorney. Estate plans can create significant legal rights and obligations, so it is important that a knowledgeable lawyer oversee your estate-planning process.