A common misconception of estate planning is that to have one, you have to be a Gatsby-esque big shot, with a lot of money to manage. The truth is that if you have any significant assets that you’d like to be properly passed on in your absence, or even if you’d like to designate someone to take care of you should you become incapacitated, you should start your estate plan sooner than later. Estate plans can ensure your most important assets, such as your family home, are properly handled in the manner you want, along with protecting your family from probate, which could become an expensive and stressful process.
What’s in an estate plan?
Estate plans don’t have a set format and can consist of several different documents you may choose to include, depending on what your goals are. The first and arguably most important is a trust. You’re likely familiar with a will, which specifies what will happen to your assets. A trust has similar use cases to a will, but with some advantages. Wills must pass through probate, which means that the details of your assets will become public record. Because trusts do not have to pass through probate, the process of passing assets to your beneficiaries is also significantly faster.
Different types of trusts are available, generally called revocable or irrevocable. The revocable trust allows you continued access to your assets throughout your life, and the ability to change the terms of the trust should you want to change how your assets will be distributed. An irrevocable trust may not be changed and its assets may not be accessed, but is also considered a separate entity, which means that there is no tax liability to the grantor of the trust. Irrevocable trusts will also protect the assets it contains from liability because it is an entirely separate tax entity. Your estate plan may contain both a trust and a will, depending on how it’s structured.
Your estate plan may also contain power of attorney documents. These allow for pre-emptive protection of your health and property by dictating your decisions should you become incapacitated. Financial power of attorney will provide a person of your choice the ability to manage your assets and finances, meaning that should you become unable to, they could pay bills, protect against financial abuse, and ensure that those who rely on your financial support do not run into issues in your absence.
Medical power of attorney ensures that a person of your designation will be able to make medical decisions for you should you become unable. When a person without established power of attorney documents becomes unable to make decisions for themselves, their loved ones must go through the courts to gain guardianship in order to make financial or medical decisions for them. Not only does this cause problems for your loved ones, but it also means that the court will decide who becomes the guardian, and without an established plan in place, that guardian will have to make decisions based on what they think is best, not your wishes. Having both types of power of attorney documents will help avoid the need for guardianship, which can be an expensive and difficult process.
Ledwidge & Associates has worked with many clients to create specialized estate plans that serve them well, and we’re ready to work with you to meet your goals. To begin your estate planning on the right foot, contact us today.
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