Estate plans, otherwise known as end-of-life planning, are formal arrangements of how an individual’s assets will be distributed upon their death. Because an individual is often proud of what they have built up over their lifetime, it is important to them that their belongings are taken care of and go to the people they want to have them, rather than being left to the government or causing family disputes that make a difficult situation even worse.
While every estate plan is unique in terms of its size and complexity, there are three elements that are common to all estate plans:
A Will or Trust
Wills and trusts are documents that outline an individual’s wishes for their estate. They are similar in that they both allow an individual to specify who will receive their assets, but they differ in how they are executed. A will goes into effect after an individual’s death, at which point their assets are distributed according to the instructions laid out in the will. A trust, however, is a legal entity that holds an individual’s assets during their lifetime and distributes them according to the instructions in the trust upon the individual’s death. Trusts can happen in addition to or instead of a will.
Powers of Attorney
A power of attorney is a legally binding estate document that offers someone else official authority to make critical decisions on your behalf. There are two different types of powers of attorney: financial and medical. A financial power of attorney allows someone else to handle your finances if you cannot do so yourself, while a medical power of attorney gives someone else the authority to make medical decisions on your behalf when you cannot communicate your wishes.
A scenario where a medical power of attorney would be used is if an individual is in a coma and the hospital staff needs a decision to be made on whether to keep them on life support. If there is no clear directive from the individual in the form of any legal documentation, then the person with medical power of attorney would be responsible for making that decision.
Beneficiary Designations
Beneficiary designations are often used in conjunction with a will or trust, as they specify who will inherit any assets that are not covered by either of those documents. For example, life insurance policies and various retirement accounts typically have beneficiary designations that overrule what is laid out in a will or trust. This is because these types of assets are not always subject to probate, which is the legal process of distributing an individual’s assets after their death.
The qualities of a strong beneficiary include:
- Being of age (18+).
- Having a clear understanding of the estate planning process and what it entails.
- Having the mental capacity to make decisions about their estate.
- Being able to communicate their wishes clearly and concisely.
- Having a good relationship with the person that has chosen them to be their beneficiary.
FAQs
Q: What Are the Three Main Priorities You Want to Ensure With Your Estate Plan?
A: The three main priorities of an estate plan are to ensure that your assets are distributed in the way you prefer, that someone else has the authority to make decisions on your behalf if you are unable to do so, and that your beneficiaries are clearly defined. These three areas will ensure that, when the time comes, your estate can sail through smoothly while minimizing any legal or family disputes.
Q: What Are Some Common Mistakes People Make When Setting Up Their Estate Plan?
A: There are a few common mistakes people make when setting up their estate plan. One mistake is failing to properly fund their trust. This is when people set up a trust but do not put all of their assets into it. This can cause difficult problems down the road because the trust may not be able to cover all the expenses it was intended to. Another mistake is failing to keep their estate plan up to date. For example, people may forget to update their beneficiary designations after having children or getting divorced. Because relationships and family dynamics can change over time, a lack of modifying one’s estate plan can result in assets going to people that the individual no longer wants them to.
Q: What Are Some Tips for Choosing the Most Effective Estate Planning Attorney?
A: When choosing an estate planning attorney, you should make sure that they have experience in the field of law that you need. Ask specific questions that are troubling you and see how they respond. Also, ask about their fees and what you can expect from the services they provide. You should also make sure that you feel comfortable with the attorney and that they are someone you can trust.
Q: What Are Common Assets That People Include in Their Estate Plan?
A: There are many different types of assets that people can include in their estate plan. Some common assets include real estate property (such as a house or land), personal property (such as jewelry or furniture), cash and investments (such as stocks, bonds, and mutual funds), and life insurance policies. People can also include more unique assets, such as a family business or a valuable art collection.
Contact Robert G. Petrovich, Attorney at Law
As you begin to think about your estate planning needs, it is important to consult with an experienced estate planning attorney who can guide you through the process and ensure that your assets are protected. It is difficult to advance in the process of estate planning without the help of an expert. You could risk making mistakes in the paperwork or not including all your assets, which could lead to disputes among your beneficiaries later on.
To get started on estate planning and avoid common mistakes, contact Robert G. Petrovich, Attorney at Law, today. We are proud to support our clients and help them feel more comfortable and confident about their estate planning needs. We look forward to hearing from you soon.
