A proper estate plan can keep your loved ones from guessing your intentions when you are no longer able to answer their questions. It can also ensure that your loved ones received precisely what you mean for them to have. If you do not have an estate plan, it is hard to find out what you need to know about your plan.
There is a lot you can do with an estate plan. There are three things that everyone should know about estate planning before they begin their own plan.
The difference between a will and a trust
Many people are under the misconception that a will and trust are the same things. Several differences between them can have a significant impact on the outcome of your estate. Wills are something a Testator (the person who makes the will) uses to pass on assets and other valuables after their passing. This transfer of assets can be subject to taxes.
Trusts also disperse assets and valuables, but they can initiate when the testator chooses, whether they are still alive or not. This can ensure that children have to wait until a certain age before accessing the funds. Trusts can also bypass some inheritance taxes, with proper planning.
What your healthcare choices are
An estate plan is not just for when you pass on. You can establish a healthcare directive to specify what you want to happen when you are physically or mentally incapacitated due to an injury or illness. You can decide things like how long to remain on life support, when you want to amputate a limb, or how long you want to remain in a coma before taking an alternative action. By making these decisions ahead of time, you can spare a loved one the burden of deciding for you.
What a Power of Attorney does
Before you appoint someone to be your power of attorney (POA), make sure you understand what authority you are granting them. A POA can have financial authority over your estate, and be able to make business decisions, as well as settle claims, make purchases, employing people, and make insurance decisions. You can also establish the same person or another person to be a health care POA or someone who will make your health decisions on your behalf.
Start your planning with an informed objective
Knowing who you want to receive your assets and how, what healthcare decisions you want, and who to appoint as your POA can set the foundation for a healthy estate plan. An estate planning attorney can help you consider other important decisions, so make sure you are doing everything you can to protect your future.