5 Critical Building Blocks to Every Estate Plan Key Points:

• Estate planning is the process of arranging for the management and/or distribution of money and property during and after an individual’s life.

• While numerous estate planning techniques can be implemented, there are a handful of documents that are critical building blocks to every estate plan.

• It is important to monitor and update your estate plan periodically to account for both major life changes and modifications to the estate law.

Estate planning is like an orchestra. Each instrument, while impressive on its own, fulfills a unique purpose. When combined, these “instruments” can create a masterpiece.

Estate planning is the process of arranging for the management and distribution of money and property both during and after an individual’s life. An estate plan can be comprised of a collection of documents, each serving a specific purpose. These purposes can include: specifying who will care for your children if you are unable to do so; avoiding the cost and publicity of probate; and allowing you to name someone to make decisions on your behalf if you become incapacitated. Each document alone will fulfill a purpose, but an effective combination of documents can significantly reduce both emotional and financial strains on your heirs once you pass.

5 critical building blocks to every estate plan

An individual can implement numerous estate planning techniques, but the five following documents are critical building blocks to every estate plan:

1. Will: A legal document that allows the ‘will maker’ the opportunity to control the distribution of his or her property at death and designate who will be in control of this process at that time (the “Executor”). A will is typically recommended for anyone who is married, owns significant assets, or has young children. Having a will in place will ensure that your assets are divided as you wish, rather than under the applicable state intestate laws.

   A will can also be crucial if you have minor children, as it allows you to name a specific guardian to care for your children at your death.

2. Revocable Trust: Like a will, a revocable trust is a legal document that specifies how assets should be distributed, but with possible additional benefits such as the ability to control when and under what circumstances your beneficiary will receive their portion of assets. Unlike wills, trusts are not subject to probate, so your heirs can usually receive their share of assets more quickly and without court approval.

3. Power of Attorney (POA) for Property: A durable POA for Property authorizes a trusted individual (an “agent”) to handle your financial affairs on your behalf in the event you become incapacitated. The powers given to your agent typically come in two forms: general (with no limitations on allowable actions) and limited (with limitations placed on authority). In practice, a POA for Property is often used to make sure that a trusted individual can pay for medical expenses and other costs incurred during the time that the “principal” is incapacitated.

4. Power of Attorney for Healthcare: A durable POA for Healthcare allows a trusted individual to make healthcare decisions on your behalf. This document is helpful in cases where you, as principal, are incapacitated or unable to make decisions on your own. Your agent could have full access to your medical records; the authority to make choices for you about tests, surgery, medication; and the ability to choose specific doctors and hospitals that will care for you.

5. Living Will/Directive for Healthcare: Unlike a POA for Healthcare, a living will is a document that spells out medical treatments you would and would not want to be used to keep you alive. Some examples of life-sustaining treatment commonly found in a living will are resuscitation, mechanical ventilation, and access to a tube feeding.¹ A living will, can also be used to stipulate other decisions, such as pain management and organ donation.

Remember to monitor your estate plan frequently

A common misconception about estate documents is that after drafting them, you can simply “set it and forget it.” This is not the case. In fact, it is important to monitor your estate plan frequently to account for any major life changes or changes in various estate laws. Some of the more common life events that will likely require you to revisit your estate plan are the birth of a child; moving to a different state; divorce; or the death of a family member. We typically recommend clients review their estate plan every couple of years to ensure that it continues to meet their needs.

Key take-away

An effective estate plan comprises documents that each serve a specific purpose. These documents rely on one another to protect not only your assets but your beneficiaries’ interests as well. In most cases, executing a will, POA’s for Property and Healthcare, and a living will is beneficial, regardless of a person’s asset levels. A revocable trust, however, can be more situational, and its uses and applications vary depending on each client’s unique situation. Regardless, these documents need to be reviewed every few years to account for any life changes that could materially impact your planning.

If you or someone you know are currently in the process of drafting or reviewing personal estate documents, Capstone can be a great resource to utilize if you have any questions or concerns.

Source

¹https://www.mayoclinic.org/healthy-lifestyle/consumer-health/in-depth/living-wills/art-20046303

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