When it comes time to consider estate planning, many people can procrastinate without understanding the consequences of their delay. No one is truly comfortable thinking about what happens in the case of injury, disability, or even death, especially if young children are involved. However, one of the best ways to achieve peace of mind is to have a complete estate plan in place to make sure your family is taken care of when the time comes.
There are five primary documents when it comes to estate planning, ranging from a Will to a Power of Attorney. Let's take a moment to look at these five documents that help us make sure our families are taken care of. Laws can vary by state, so it's important to have each document drawn up by a local attorney who's familiar with each state's regulations and guidelines.
Will
The Will is what many people think in terms of complete estate planning. This document primarily addresses three important questions, but only comes into effect upon one's death. First, it designates who controls the administration of one's estate after someone passes away. Second, it establishes who receives the assets. Third, it designates legal guardians and conservators to handle the medical and financial decisions if there are any surviving minors. This document is vital in securing the foundation of your final matters if you do not have a Revocable Living Trust.
Power of Attorney: Medical and Financial
There are two main types of power of attorney documents everybody needs: a Financial Power of Attorney and a Medical Power of Attorney. These two documents are only effective while one is alive. They grant a person control of financial and medical affairs in the case of disability, a coma, or any circumstance that would prevent you from making your own decisions. Each document helps prevent the expense of a court proceeding to determine who is allowed to manage your financial and medical decisions when you are unable to do so.
Living Will
The Living Will, also known as an advanced medical directive, is used to officially state, in advance, whether one wants to refuse or terminate the use of artificial life support should the situation arise. This document also allows an individual to state in advance whether he or she should receive food and water in the event the Living Will is in effect. By establishing your desires in advance, it helps remove such burden from your family's shoulders.
Living Trust
A Living Trust, also known as a revocable trust or revocable living trust, is an alternative to the standard Will. It is a tremendously flexible document that can provide for the management of one's assets while alive and upon his or her passing. This method of estate planning enables exceptional control over one's assets. If drafted properly, it limits or eliminates certain taxes and offers a tremendous degree of asset protection for one's heirs should they ever get divorced or have other creditor problems.
These five documents cover several of life's circumstances and should be a part of everybody's base estate plan.
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