What do you mean by “an estate plan?”
Simply stated, an estate plan refers to a set of documents that provide for your wishes upon your incapacity and upon your death. Typically, an estate plan will include the following items:
- Your Last Will and Testament provides for distribution of your estate upon your death and designates an “executor.” Your “Estate” refers to everything that you own at the time of your death. Your “Executor” is a person or an entity, like a bank, that you specifically designate to administer your estate upon your death. Your Executor will be in charge of handling your final affairs, such as paying your final bills, collecting all of your assets and making distributions of your estate in accordance with your wishes. Your Will can provide for direct distributions to the people that you want to give gifts to, and the people to whom you’d like to leave your estate are referred to as “legatees.” Your Will can also provide for your estate to be distributed to your legatees in the form of a “testamentary trust,” which will be discussed further in the “Revocable Living Trust” section. Your Will can nominate your choices for guardians of your minor or disabled child upon your death or it can provide for care of your loved
- Your Power of Attorney for Finances and Property, also known as a “Durable Power of Attorney, allows you expressly designate someone to act on your behalf with regard to your finances and property when you cannot act. For example, if you are incapacitated for some reason, your agent can make financial decisions on your behalf or access your financial records for you. This is a very important power and is not to be given away lightly. However, a properly drafted and correctly executed power of attorney for property can alleviate the need for formal guardianship proceedings in court, but there are specific circumstances where a guardian is required. In order to plan for this possibility, your power of attorney for property will nominate someone to be the guardian of your estate in the event that you become disabled and require a court-appointed guardian of your assets.
- Your Power of Attorney for Healthcare allows you to expressly designate someone to act on your behalf with regard to your healthcare decisions. There are certain standards that you may specify in your power of attorney for healthcare, such as whether your agent may make decisions regarding your healthcare at their sole discretion or if they must have a concurring physician’s opinion. You may also choose whether you want death-delaying procedures to be utilized if your death is imminent. You can also include additional wishes regarding your healthcare, such as adherence to religious beliefs.
- Your Living Will is a witnessed and notarized statement in which you clearly state that you do not want death delaying procedures to be used when you have an incurable and irreversible injury, disease, or illness judged to be a terminal condition by your attending physician, meaning that your death is imminent. A Living Will is sometimes referred to as an “Advanced Directive to Physicians.”
These are the four most essential documents that can be prepared for you in an estate plan.
I have many clients that ask me why so-and-so recommended a revocable living trust. You may be wondering why a revocable living trust is not included in the list above. The reason why is that you can have a completely valid estate plan without a revocable living trust, but there are certain favorable benefits to having a revocable living trust that you cannot derive from a simple will.