Estate planning is for people who have big houses, millions of dollars and are 82 years old. True or false?
It is true that the term “estate planning” conjures up an image of an elderly couple roaming the gardens of their country estate, arm and arm, talking about how they plan to split their massive fortune between their adult children and their charities of choice. But it is entirely false that estate planning is only for people like this couple.
Let’s talk a little about estate planning. What does it really mean? Well, in my practice, when an individual or a couple comes in to discuss estate planning, what we are usually talking about is drafting two basic documents: a will or trust and a power of attorney.
The will is a legally binding set of instructions for who will receive your real and personal property in the event of your death, as well as who will be the person in charge of distributing this property. It also clarifies your wishes for burial or cremation.
In your initial session with me, you may discover that a trust rather than a will is a better planning tool for you. By setting up what’s commonly called a “living trust” you can place most of your property – accounts, cars, and your house – into the trust. Upon your death, this property automatically passes to those you have chosen. But, while you are living, you continue to have full control over trust assets. Generally, the purpose of creating a living trust is to avoid that dreaded “probate” and to create a smooth transition for transferring property.
While a will is commonplace to most people, less understood is a “power of attorney.” A power of attorney does not really do what it sounds like: No, you cannot go out and practice law if you have one of these. . . . A power of attorney gives someone else the power to act on your behalf in certain circumstances. When I draft a power of attorney for you, you will elect someone as your “agent” and “attorney-in-fact.” This person is typically your spouse, a relative or a close friend, and they are given authority over your financial matters in the event of your incapacity. Their powers may actually extend to broader financial matters such as running your business.
Many of my clients also elect to have an advance directive prepared, which spells out their wishes for health care decisions should they be unable to express these wishes themselves. They should be given to all health care providers and a few trusted friends or relatives.
So that’s estate planning in a nutshell. Whether you are single or married, young or old, in a traditional or non-traditional relationship, have a $100 or a million dollars, it is an important tool to protect your family, your property and will give you peace of mind.