Creating an estate plan is not always a simple process. Often, it requires the teamwork of financial advisors, accountants and probate lawyers to create a plan that will protect their client’s assets and well-being in the event of death or serious illness. A solid estate plan should answer all the “what ifs” so that there is nothing left to doubt as to what the wishes of the client for which has been created.
At a minimum, an estate plan should include these four documents:
This document names a representative to act on the behalf of the person for which it is written. This representative is referred to as the “Executor.” Upon the death of the owner of the will, the executor will petition the probate court either on his own, or with the assistance of a probate lawyer. The establishment of trusts may also be incorporated into a will to protect assets from estate taxes.
#2 Living Trust
A living trust is created while a client is still alive. It may be used to prevent assets from going into probate upon death. A trust could be revocable or irrevocable. With a revocable trust, a Trustee is named to act on the behalf of the client. If the client becomes incapacitated, the Trustee will manage his assets, pay bills and ensure that the client is taken care of. Upon the client’s death, the revocable trust acts like a will. An irrevocable trust is used for tax planning for charity, business succession and family.
#3 Power of Attorney
This document authorizes a representative to act on the behalf of signer in the event they become incapacitated or impaired because of old age. A spouse, trusted friend or adult child may be given power of attorney. The power of attorney can assist with financial matters such as banking or ensuring the client’s financial advisor is handling his assets as directed. He may also work health care providers to make sure proper medical care is being given to the signer.
#4 Advance Directives
An advance directive lets a person’s wishes be known on what medical decisions concerning care can be made for him if he is unable to act on his own behalf. This could be directions to his family or physicians about what levels of nutrition, hydration or medical procedures may be used to treat the signer if the need arises.