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It’s a common misconception that only the very wealthy have estate plans. The truth is that every person has an estate plan. There are structured estate plans consisting of written documents like a trust or will, a power of attorney, a healthcare proxy, which include instructions based on decisions you make for yourself while you are able, and then there are “default” plans under state law that apply to those who do no such planning.
If you own any assets, a home, a savings account, an investment or a retirement account, for example, or if you have loved ones who depend on you, you should create your own estate plan. The benefits of proper planning include:
Ensuring your assets are distributed and used as you intend, rather than according to the laws of the state where you live;
Minimizing any estate taxes;
Protecting assets from creditors and divorce;
Setting forth your wishes regarding your own medical care; and
Avoiding potential conflicts among your family members and other loved ones.
A proper estate plan consists of several elements. A will may set forth how your assets are to be distributed following your death. A trust established either during your lifetime or pursuant to your will may provide further control over the distribution and management of assets, provide asset protection, achieve estate tax savings, or several of those goals together. A Power of Attorney will designate who can handle your financial matters (such as paying bills) in the event of your incapacity. Finally, a Health Care Proxy and Living Will set forth your wishes and designate an agent to make decisions regarding your medical care if you are unable. FInally, these documents are not set in stone, they may need to be updated or tweaked if you go through a big life change such as a marriage for example, or significant increase in wealth, new children, or divorce, etc.
Putting these documents together takes some thought and time, but a reasoned estate planning attorney will guide you through the decisions and will make the process as seamless and calm as possible. It is a great accomplishment to have these documents done!