Foundational planning
A foundational estate plan is critical to have in place to plan for the unexpected. Your foundational plan should include bothwealth transfer planning upon your passing and incapacity planning.
Wealth Transfer Planning:
A Will or Revocable Living Trust will help you direct what happens to your wealth upon your passing. Either tool may be used to name beneficiaries to inherit your estate. The difference between the two is the process, or the way in which the assets are administered.
Will:
Subject to probate: Probate is a court-driven process that may be both time consuming, costly and public. Once the Will is admitted into the court system, anyone can research who you have named as beneficiaries and what they are receiving from you. Essentially, probate is the process of asking a judge permission to administer your estate as your will directs.
Revocable Living Trust:
Avoid probate: your estate may avoid the probate process by titling assets into your trust. Additionally, if you own properties in multiple states, you may avoid probate in each state. Result: the administration of your estate:
- happens timely;
- is more cost-effective; and
- remains private.
Plan for incapacity: in addition to planning for your passing, a trust may also be helpful during your incapacity. You may name a successor trustee to manage your trust assets during your incapacity
Retain control: Although the assets will be owned by your trust you may continue to use and benefit from these assets as you currently do.
Incapacity Planning:
When creating a foundational plan, it is important to remember incapacity -based documents. These documents direct who may step in to assist you in the event you are incapacitated and cannot handle your financial matters or make your own medical decisions.
Financial Power of Attorney: Your financial power of attorney, also known as a general durable power of attorney or springing power of attorney, allows you to designate an individual to handle your financial affairs on your behalf. It is designed to help avoid the need for a guardianship or conservatorship proceeding in the event you become incapacitated. This document should explicitly indicate the powers you are granting to your agent to ensure they may handle all of your affairs while you cannot. These powers may include paying your bills and filing your income tax returns, among other powers.
Healthcare Power of Attorney: Your healthcare power of attorney, also known as a medical power of attorney or health care proxy, allows you to designate an individual to make your medical decisions on your behalf when you cannot convey your wishes to medical providers.
Living Will: This document allows you to indicate your end of life decisions. It may alleviate the pressure of having your loved ones make these decisions for you.
HIPAA Authorization: This document allows you to name individuals to have access to your protected health information. This document should be valid until well after your passing to allow your loved ones an opportunity to vital health information. Please note, these individuals have no power to make decisions on your behalf.
Fiduciary Selection:
When selecting trustees and agents to serve on your behalf, it is imperative that you name individuals who are trustworthy, responsible, and level-headed. It is recommended that you name one individual to serve at a time to avoid unnecessary conflict among your fiduciaries and avoid undue delay in handling your affairs.