Do you have an estate plan? According to the American Bar Association, only 40% of Americans over 65 have a will or power of attorney either healthcare or financial in place, citing most often that estate planning is only necessary for the wealthy; however, that’s not the case. Ask yourself, who would take care of your minor children, make healthcare or financial decisions for you, or who would help loved ones avoid excessive delays and court costs after you die. It is important to arm yourself with facts, and know the difference between a will, trust, and power of attorney.
This blog is intended for educational purposes only and should not be considered legal advice.
Definition:
- Will: A will is probably the most simple document in estate planning. This document states what should happen to your property after you die. In your will, you can name beneficiaries for your property, name an executor, name guardians for your minor children, and designate to the executor how to pay taxes and debts. A will does not keep your information private, protect your wishes from court challenges, or avoid any type of conservatorship; however, you do have the ability to revise this document. All property that passes through a will, goes through probate. Probate is designed to complete a person’s affairs after their debts have been paid. It is a long and expensive process.
- Trust: In a living trust, a Trustee (often yourself) and a successor trustee (after your death) are named to manage and distribute property, etc. after your death. Beneficiaries for your property are named, and in the case of a living trust, probate is avoided, and property can be distributed to your beneficiaries without fees or court challenges. It is important to note that all property must be transferred into the trust. Following your death, all documents and information are kept private, which for most, is a top priority. There are two types of living trusts, revocable and irrevocable. A revocable living trust allows you to revise the document, whereas an irrevocable trust cannot be changed once it is finalized. Creating either of these documents is not as simple as a will and should be completed by an attorney. A living trust does not allow you to name guardians for your minor children, name executors, or allow you to instruct how taxes and debts should be paid. It is this reason why most individuals create both a living trust and a will as part of their estate planning.
- Power of Attorney: A power of attorney gives one or more persons, the power to act on your behalf. These “agents” or “attorney-in-fact,” may be limited to a particular activity such as paying bills, selling a piece of real estate for you, or making medical decisions on your behalf. If a power of attorney is durable, it remains valid even if you become incapacitated and are unable to make decisions for yourself. If a power of attorney is not durable, it ends immediately if you become incapacitated. There are two main types of durable power of attorneys: financial and medical, which each respectively names someone to manage your finances or medical decisions if you become incapacitated.
The importance of estate planning, regardless of financial status, is simple. It is a safety net for your children or beneficiaries, helping to avoid difficulties or disagreements on medical or financial decisions, and minimizes the length of wait times for disbursement. Most importantly, naming a power of attorney, and creating a will or living trust, ensures your wishes will be carried out as you intended them to be.
Ready to get started? Contact the Law Offices of Reginald Keith Davis for your estate planning needs.