You may be wondering what an estate plan actually is and why you need one. An estate plan is a set of legal documents through which you leave your final legacy and instructions about 1) who gets what, and 2) who does what. Without an estate plan, a judge and the laws of your state will determine who inherits your stuff. The court will also make important decisions about who takes care of your children if they are minors.
At the heart of any estate plan is your last will and testament. However, depending on your goals, an attorney may also recommend setting up a trust to help you with the transfer of your assets. A trust is a unique estate-planning tool because it is a separate legal entity which will not die when you do. Among other things, a trust can provide additional privacy for your estate, help to lower tax liability, and provide a useful tool for caring for loved ones after your death.
A good estate plan will also include documents which you may need during your lifetime, not just at your death. Typically, these include your advance medical directives and a durable general power of attorney. Your advance medical directives contain your wishes about the use of extraordinary medical interventions at the end of your life and who may make medical decisions on your behalf. A durable power of attorney is similar in that it is useful only during your lifetime. In it, you name someone who you trust to take care of everyday business for you. This document can be especially valuable if you become disabled or incapacitated.
To get started with your plan, contact an estate-planning attorney who is knowledgeable about your state’s laws. You may want to ask for a complimentary first meeting to see which attorney may be a good fit for you. Be sure to ask about the attorney’s fees for drafting a typical estate plan.
You can reduce the cost of creating your estate plan by doing some important homework beforehand. The first step is to start thinking about who gets what. Before your meeting, begin by making a list of all of your major assets and which individuals or charitable institutions you would like to inherit your assets.
The next step is to start thinking about who does what. In other words, who are the people you would like to serve in the important legal roles. If you have young children, start thinking about who you would trust to take care of them and the money left for them. Who would you trust to make medical decisions for you and who would you trust to take care of your personal finances if you were incapacitated? And finally, who would you like to oversee the transfer of your assets when you die?
Spending the time and money to create your estate plan is one of the best gifts you can give to yourself and your heirs: peace of mind.