Estate Planning Basics for Seniors
The orderly disposition upon death of money and other assets acquired over a lifetime can be easily accomplished by hiring an experienced estate planning attorney to create a will, trust and other documents, yet a recent Gallup poll shows that only about 46% of adults have a will.
Death is inevitable, but an estate plan gives you the peace of mind knowing that the distribution of the assets you’ve worked hard throughout your lifetime to acquire will be honored when you die.
Depending upon the documents included in it, an estate plan can also help while you are alive. Documents, such as powers of healthcare directives and powers of attorney designate someone you trust to make health and financial decisions for you when physical or mental incapacity prevents you from doing so.
What is estate planning, and what makes it so important?
Estate planning is the creation of legal documents to give you control over what happens to you and all of the money and property that you acquire over the course of a lifetime. It typically includes a will and a trust containing instructions for the distribution of your estate upon your death, but ensuring for the future financial welfare of your family is only one aspect of an estate plan.
Powers of attorney and healthcare directives included in an estate plan give you control over what happens to your financial interests and medical care during your lifetime. If you become incapacitated because of a serious head injury suffered in a slip-and-fall or other type of accident estate planning documents become essential to preserving control over your life.
If you do not have an estate plan, distribution of your estate, decisions about healthcare, and your personal and financial affairs are left to state laws and courts to determine what is best for you. An estate plan lets you ensure that your wishes are followed.
Essential components of an estate plan
An estate plan must be specifically tailored to meet your needs, but there are four components essential to estate planning that must be addressed:
- Will or trust for the orderly distribution of money and property upon your death.
- Living will or healthcare directive designating someone to make healthcare and end-of-life decisions on your behalf.
- Power of attorney giving someone who you designate the legal authority to handle personal and financial affairs for you.
- Designation of beneficiaries for life insurance policies, investment and retirement accounts, and accounts at banks and other financial institutions.
An estate planning attorney gathers information from you to design an estate plan to implement your wishes based on your particular circumstances while minimizing estate, gift and other taxes.
Wills and trusts
A will lets you name an executor to handle your estate upon your death. The executor has legal authority to pay taxes and debts owed by the estate before distributing what remains to the people or charities you designated in the will.
Probate is the legal process where a court grants your executor the authority to act on behalf of the estate. The court continues to monitor the handling of the estate to ensure it follows the law and the terms of the will.
A trust may sometimes be preferable to a will because it does not require probate, which saves time and money, and may offer you greater flexibility in the distribution of your estate. For example, if you have minor children or wish to give your estate to someone who is unable to care for themselves, creation of a trust allows you to designate a trustee to control the money and property to protect it while providing an income, as you direct in the trust, to the beneficiary.
Power of attorney
A power of attorney lets you designate a person you trust to handle financial affairs and personal affairs for you. You can make the power as limited or as broad as you wish and revoke it whenever you choose.
Living will and healthcare directive
A living will is a statement of the choices you want made regarding critical health decisions about medical care to be administered or withheld, including end-of-life decisions. It only provides guidance to your doctors, so a living will is usually combined with a healthcare directive, which lets you name someone to be legally empowered to make decisions about medical care and treatment when your physical and mental health and wellness prevent you from making them.
A beneficiary is the person chosen by you to receive money or property upon your death. Some of the types of beneficiary designations you encounter include:
- The people or charities inheriting property through a will or trust.
- The person receiving proceeds of a life insurance policy upon your death.
- The person to whom bank, retirement, and investment accounts are payable upon your death.
Designation of beneficiaries can have tax consequences for your estate and for the beneficiary, so discuss your choices with your attorney and make whatever changes are needed to keep the choices consistent with your overall estate plan.
Control over the disposition of your hard-earned money and property after death, and decisions made about your health and welfare should you be incapacitated, can be accomplished through estate planning. All it takes to make it happen is a call to an estate planning attorney to schedule a consultation.
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