What
Key Estate Planning Tools Should I Know About?
Planning is
a part of nearly everything we do in life. It’s even a part of dying. How will
you preserve your assets from estate taxes and probate fees? How will you
ensure distribution according to your wishes? Who will make financial
and medical decisions in the event of your incapacity?
By taking
steps in advance, you have a greater say in how these questions are
answered. And isn’t that how it should be?
Wills and
Trusts
Wills and
trusts are two of the most popular estate planning tools. Both allow you to
spell out how you would like your property to be distributed, but they also go
far beyond that.
Just about
everyone needs a will. Besides enabling you to determine the distribution of
your property, a will gives you the opportunity to nominate your executor and
guardians for your minor children. If you fail to make such designations
through your will, the decisions will probably be left to the courts. Bear in
mind that property distributed through your will is subject to probate, which
can be a time-consuming and costly process.
Trusts
differ from wills in that they are actual legal entities. Like a will, trusts
spell out how you want your property distributed. Trusts let you customize the
distribution of your estate with the added advantages of property management
and probate avoidance.
Wills and
trusts are not mutually exclusive. While not everyone with a will needs a
trust, all those with trusts should have a will as well.
Durable
Power of Attorney for Finances
Incapacity
poses almost as much of a threat to your financial well-being as death does.
Fortunately, there are tools that can help you cope with this threat.
A durable power
of attorney is a legal agreement that avoids the need for a conservatorship and
enables you to designate who will make your legal and financial decisions if
you become incapacitated. Unlike the standard power of attorney, durable powers
remain valid if you become incapacitated.
Health Care
Proxies and Living Wills
Similar to
the durable power of attorney, a health care proxy is a document in which you
designate someone to make your health care decisions for you if you are
incapacitated. The person you designate can generally make decisions regarding
medical facilities, medical treatments, surgery, and a variety of other health
care issues. Much like the durable power of attorney, the health care proxy
involves some important decisions. Take the utmost care when choosing who will
make them.
A related
document, the living will, also known as a directive to physicians or a health
care directive, spells out the kinds of life-sustaining treatment you will
permit in the event of your incapacity. The directive creates an agreement
between you and the attending physician. The decision for or against life
support is one that only you can make. That makes the living will a valuable
estate planning tool. And you may use a living will in conjunction with a
durable health care power of attorney. Bear in mind that laws governing the
recognition and treatment of living wills may vary from state to state.
|
Estate Planning Tip Keep all your important financial and legal
information in a central file for your executor. Be sure to include: • letters of last instructions |
©
2005 Emerald Publications
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