Life happens in a flash. Yet with the pace of living today, we hardly seem to have time to think about the future. If it is not one thing, then it is another – most families struggle with creating a clear plan of action for the future, instead focusing on the here and now to keep life going.
That is not inherently a terrible thing. Many business decisions require a prominent level of mindfulness and perception. However, business also requires vision. And just like business, any family without a plan is a family lost. Planning for tomorrow is an essential part of life, and when created and executed well, a plan can bring a family good fortune for generations to come.
It is the same way with inheritance planning. Sooner or later, we must leave this world. But what do we do with the possessions and assets we leave behind? Some people die without ever getting the chance to think about what they want to leave their children and why. Others write their own wills, only to make a rudimentary mistake, sending their family through the ordeals of excessive probate and costly taxation.
Why You Should Consider Estate Planning
A large branch of the law is dedicated towards ensuring that things find their rightful place: property laws, protecting everything from homes to ideas. Estate planning is a series of tools dedicated towards ensuring that everything you own makes it to its rightful owner(s) after you, the current owner, pass away.
Good estate planning does more than make sure that your property makes its way into your family’s hands – it does so while spending as little of your money and time as possible. Therefore, choosing a professional service is crucial – they can help you cut down on the unnecessary headaches and astronomical costs that accompany basic estate planning mistakes.
Last Will and Testament
Perhaps the most common estate planning tool, the last will and testament is a document detailing how your belongings should be distributed. Accounts, bank instruments, and any property under joint or partial ownership cannot be transferred through a will.
A will can be used to determine who gets what – even if they are not related to you. A will can also be used to ensure that certain heirs do not receive what they were originally entitled to. It can also be used to determine who should take guardianship of your children if you die before they become legal adults.
A (typically revocable) living trust is an increasingly popular estate planning tool, and the ideal for avoiding probate and more precisely managing your estate while you are still alive. Unlike a will, a trust goes into effect immediately and is not on public record, allowing you to keep your finances private. A trust also gives you the ability to fund into it your ownership of joint assets, allowing you to name a beneficiary as successor to your portion of a property rather than relinquishing said portion to the property’s co-owner upon your death.
While a living trust cannot be used to name guardianship for your children, it can be used to provisionally distribute assets to your children rather than giving them all their inheritance upon your death, or when they are 18.
A trust works through a notarized trust document detailing the trustee (the manager and executor of the trust), the trust’s beneficiaries, and the things funded into the trust. Funding a trust requires you to amend the ownership status of your assets, change the titles on your properties, and procure proof of ownership documents for valuables such as jewelry.
There are a few things that cannot be funded into a living trust, including a life insurance, and ideally, a vehicle you use. Luxury cars are an exception, but vehicles you use often are a liability rather than an asset – a wrecked car in the name of your trust is more likely to result in larger costs than if you kept it under your own name.
Planning for Your Incapacity
Legally-speaking, death is not the only way to render yourself incapable of functioning as a person. If you are medically-incapacitated beyond all hope of recovery, yet still technically alive, then certain documents like a last will and testament cannot go into effect. Furthermore, without a durable power of attorney, no one could make financial decisions in your name except members of your own family.
Estate planning is specifically about ensuring that your future of your finances and properties are insured against the event of death or incapacity – and to that degree, a proper planning process involves the creation of a durable power of attorney for health care, a durable power of attorney for finance, a living will, an HIPAA form to protect the privacy of your health, and a document clarifying whether you would like to be an organ donor in the event of your death.
Durable Power of Attorney
A durable power of attorney for financial or health care purposes is the transfer of decision-making power from you to someone you trust with your life in the event of your incapacity. If you write someone into a durable power of attorney for finance, then they can use your finances to pay your bills, collect payments, pay off credit debts, and generally take care of the day-to-day financial matters that need to be done, including managing investments.
A durable power of attorney for health care works in a similar fashion, but instead gives someone the power to make choices regarding your health care in the event of your incapacity.
Not to be confused with a living trust or a last will and testament, a living will is a document detailing what sort of a final medical decision your family should make if you are beyond help and in a dire medical situation. Like a DNR order (do not resuscitate), it is a document designed to convey your exact wishes to the family so there is not the least bit of ambiguity regarding what should be done in the tragic case of a major accident, stroke, or permanent life-debilitating disability.
Through a living will, you can communicate what medical procedures you will allow and what medical procedures you will not allow in an end-of-life medical situation.