Estate Planning 101: Here are the basics of what you need to know about estate planning and what’s involved in each piece of the puzzle.
We always emphasize the fact that estate planning is not a one-size-fits-all, cookie-cutter endeavor. There are many tools in the estate planning toolkit, and there are different ways to proceed. The ideal course of action will depend upon the circumstances.
This being stated, there are some components that should be part of any estate plan. We will look at those here so you can go forward with a rudimentary understanding of the basics.
Asset Transfer Vehicle
You have to record your wishes regarding the way you want your assets to be distributed after you are gone. A simple will can be sufficient for some people that have very basic objectives, but there are other options that can be preferable depending on the situation.
Contrary to popular belief, a revocable living trust can be the ideal centerpiece of your estate plan, even if you are not especially wealthy. As the name would indicate, you have the power of revocation, so you can dissolve the trust and take back direct possession of the property at any time.
This is not the only level of control that you retain when you have a living trust. You could act as the trustee while you are living, and you can also be the initial beneficiary. In the trust declaration, you would name successors to assume these roles after you are gone.
One major advantage that you gain when you use a living trust is the avoidance of probate. This is a legal process that takes place under the supervision of a court. It would come into play if you use a will as your asset transfer device, and probate comes with some significant drawbacks.
It is a time-consuming process, and no inheritances can be distributed while it is underway. We are talking about eight months or even longer, and there are considerable expenses that accumulate during probate. This money is essentially coming out of the pockets of the heirs.
If you use a living trust instead of a will, the successor trustee that you name in the document would be able to distribute assets to the successor beneficiaries outside of probate. As a result, these drawbacks would be avoided.
A living trust can be the right choice for a wide range of people, but there are other trusts that satisfy various specific objectives. You should certainly discuss your options with a licensed attorney so you can make the right choice.
Advance Directives for Health Care
Any well-constructed estate plan will include considerations for medical decisions that may become necessary toward the end of your life. A living will is an advance directive for health care that should be part of the plan.
With this type of will, you state your preferences with regard to the use of life-sustaining measures like resuscitation, artificial hydration, feeding tubes, and artificial respiration. You can also record organ and tissue donation choices along with your comfort care preferences.
Another directive that you should have in place is a durable power of attorney for health care. This document is used to name someone to make medical decisions on your behalf in the event of your incapacity. These would be scenarios that are not specifically covered in the living will.
It should be noted that doctors are not allowed to release medical information to anyone other than the patient due to provisions contained within the Health Insurance Portability and Accountability Act (HIPAA). To give your healthcare agent access to this data, you should include a HIPAA authorization form.
Empowerment of a Financial Representative
In addition to health care decisions, you would do well to empower someone to handle your finances if you ever become incapacitated. If you have a living trust, you can name a disability trustee to act as the administrator if you are ever in this situation.
You can name an agent in a durable power of attorney for property to manage property that is not held by a trust.
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We are here to help if you are ready to work with a Phoenix, AZ estate planning lawyer put a custom-crafted plan in place. To request a consultation appointment, send us a message or give us a call at 888-222-1328.
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