It takes a great deal of strength and courage to plan for your death. For most people, it’s a topic they actively try to ignore. With age, however, you’ve come to accept that death is an inevitable reality. You may have witnessed the loss of loved ones over the years and the repercussions of passing away without a plan. Whatever the reason, you’re ready to begin learning about your options.
Here is a breakdown of the estate planning basics to help you start your journey.
Wills versus trusts
A trust is unique in that it can provide probate-avoidance and asset protection. Properly funded trusts can ensure that an estate bypasses probate and can expedite the administration process. In addition, a properly funded trust can protect assets from a beneficiary’s creditors, ex-spouses and bankruptcy filings. Trusts cannot be used to shield a trustor’s assets while they are still living and only take effect when its creators have passed away.
Wills, on the other hand, do not offer asset protection to its beneficiaries. However, a will can be used to address issues such as guardianship, heirs, taxes and other problems that can arise in probate court. In short, a will can simplify the process and save estate executors time and money.
If you are no longer able to make your own medical decisions, a medical power of attorney allows you to designate an agent to carry out your wishes on your behalf. You may have strong feelings about your health care according to your religion, moral and ethical beliefs. This document also provides you with the option of informing the agent of your wishes regarding how you want the decisions to be made and the type of care you’d like to receive.
Durable power of attorney
There may come a time when you become incapacitated and are unable to manage your own finances. Who would you want to take over your financial accounts? Without an attorney-in-fact, your loved ones could have trouble accessing your finances and may even have to go to court to do so. This could mean bills going unpaid open the door to financial exploitation without appropriate preparation.
Death and incapacity planning bring unique legal challenges and meeting with legal counsel can ensure that your documents are legally binding. Unfortunately, online do-it-yourself documents can pose more problems than they solve. Making arrangements ahead of time can be one of the best gifts that you can give to your loved ones when you pass away many years from now.