What is an Estate Plan?
The dictionary definition of an estate plan is “the arranging for the disposition and management of one’s estate at death through the use of wills, trusts, insurance policies, and other devices.”
All adults should have a plan for their estates, and as we age the importance of estate planning increases. People often avoid dealing with estate plans because thinking about end-of-life decisions can be uncomfortable. Some people believe that estate planning is only for wealthy people. Although thinking about end-of-life decisions may be difficult, it is very important, and the level of one’s wealth has nothing to do with the need for an estate plan.
What is Included in an Estate Plan?
An “estate” is all of the property you own individually, or jointly if married. This includes bank and investment accounts, real estate, jewelry, vehicles, family heirlooms, and any other items of value. An estate plan will carry out a person’s wishes regarding the distribution of the estate itself, as well as end-of-life decisions and medical care.
The Five Essential Components To Be Included in an Estate Plan:
- Will
A will is a legal document that manages an individual’s estate once they are deceased. A will appoints an executor of an estate to be responsible for the estate’s management, which includes distributing property in the manner you have specified, and paying debts. It can also appoint a guardian and/or trustee for children or dependents.
2. Living Will
A living will is a legal document that details a person’s wishes for end-of-life medical care, in the event that you cannot communicate your health care decisions. It is very different and separate from a will which manages your estate after death. If you are unable to communicate your health care decisions, a living will specifies what types of medical treatments, life-sustaining measures, or organ donation preferences you would prefer if in a vegetative state or terminal condition. A living will is important for both the individual and the loved ones involved. For the individual, it protects their autonomous wishes. For family members, it eliminates the stress that comes with making critical and emotional decisions on behalf of someone they love.
3. Health Care Proxy
A health care proxy is a legal document that designates a trusted individual to make medical decisions for you if you are incapacitated and unable to communicate those decisions for yourself. It is very important to designate a proxy to communicate your health care decisions, because in most instances, these are not end-of-life situations, merely circumstances where you are unconscious or otherwise incapacitated, and medical decisions about your care must be made.
4. Durable Power of Attorney
A durable power of attorney authorizes an agent to act on another’s behalf for matters relating to finances. The authorized individual will be able to pay bills, handle taxes, insurance and real estate affairs, and make investment decisions.
5. Trust
A trust is a type of relationship where specific property is held by a third party called a trustee, for the benefit of another party, called the beneficiary.
A trust is commonly created by signing a document called a trust agreement which details the terms under which the trustee holds, and distributes property for the beneficiary. Setting up a trust can be beneficial for distributing specific assets or pieces of property. With a trust, the distribution of property can be done without the time and expense of a court’s involvement. It also allows for privacy, whereas a will does not. With a will, the deceased person’s assets and the terms of their will are made public. Depending upon the specific asset or property, privacy may be preferred.
How to Get Started
An estate plan is necessary for anyone who wants to determine how their property will be distributed, and how their health-care will be determined. Having an estate plan protects an individual’s wishes and provides peace of mind to all involved.
For assistance, please contact my office at 914-332-8824.
