Estate planninghttps://goldguytrusts.com/estate-planning/ means making plans to manage and distribute assets and caring for loved ones in the event of a person’s death or incapacity. It also involves the creation of legally binding documents to outline a person’s wishes for health care and financial matters. Estate planning ensures your wishes are carried out and is also used as a means to minimizes taxes, as explained in the article “Why Estate Planning Is Important Even If You Don’t Have Assets” from The LA Progressive.
Even if you don’t have significant assets, you still need to make decisions about your health care, which is done as part of an estate plan. Here are the fundamentals to get you started.
Will. This is a legal document with specific instructions regarding how your assets are to be distributed after death and who should be named as a guardian to care for minor children. The will is also used to name a person to serve as executor of your estate to carry out your wishes and manage distribution of assets.
Trust. A trust is a legal entity holding property or other assets on behalf of another person, known as the beneficiary. There are many different types of trusts, including revocable, irrevocable and charitable trusts.
The revocable trust allows you to maintain control over assets in the trust during your lifetime. After death, the assets in the trust are distributed according to the terms in the trust. An irrevocable trust can’t be changed or amended once it’s established. Charitable trusts are used to provide for a nonprofit organization.
Trusts are used to manage and distribute assets during a person’s lifetime and after their death. They are also used to remove assets from the taxable estate and can also be used to manage expenses associated with the distribution of one’s estate.
Healthcare Power of Attorney. This document allows you to name someone to make medical decisions on your behalf if you are incapacitated and can’t make decisions for yourself. These should be created with your personal situation in mind; a standard form may not permit the nuances you want to convey to another person. With a customized healthcare POA, you can specify the type of decisions your healthcare agent may make and describe any limitations you want over their authority.
Financial Power of Attorney. The financial POA allows you to name a person, called your “agent” or “attorney in fact,” to manage finances if you are too sick or injured to do so. This should also be a customized document, as you may want to limit your agent’s authority to pay bills or allow them to do everything from paying bills to managing investment accounts. The POA expires upon your death and the agent can’t perform any tasks once you have passed away.
Without an estate plan, the care of minor children and distribution of assets takes place according to state laws, which isn’t how most people want their decisions made. The solution is actually quite easy: talk with a local estate planning attorney and get started on creating your estate plan.
Reference: LA Progressive (Jan. 11, 2023) “Why Estate Planning Is Important Even If You Don’t Have Assets”