An estate consists of everything someone owns, like bank accounts, their home and their car, and the debts they owe, like a mortgage. An estate plan, simply put, is the process of anticipating and arranging, during their life, for the management and disposal of their estate during their life and after death. While everyone should have an estate plan, for seniors it is a necessity. Without an estate plan, adult children must file a court action to obtain authority over their parent if they are incapacitated. In order to avoid this expense and process, certain documents should be created as part of one’s estate plan.
The main components of an estate plan consist of the following documents:
- Heath Care Power of Attorney – This document is in effect while the senior is still alive. It gives someone else, usually a family member, the authority to make health care decisions on behalf of the senior should the senior become incapacitated an unable to make their own health care decisions.
- Durable Power of Attorney – This document allows a specific person named in the power of attorney to act on the senior’s behalf to manage legal and financial affairs when their loved one no longer can. Power can be designated to be very broad to allow complete control, or limited to a specific task.
- Will – This document sets forth all of the essential details of who will inherit property, when and how they will inherit it, and who will be put in charge of settling final affairs. The person named as executor of the will should have a copy of it and know where the original is located.
- Trust – This document places assets into a trust for the senior’s benefit while they are alive and then transfers remaining assets to designated beneficiaries after they pass away. Trusts are overseen by the trustees, who are named by the senior in the document.
It is important that these documents be created with an attorney’s assistance while the senior is still of legal capacity. The senior must be able to discuss and understand the contents of the documents, and the consequences of their decisions.
All these documents must be written and witnessed in order to be valid and carried out. Requirements vary by state as to the exact content and required number of witnesses. A lawyer in the senior’s state of residence can provide these guidelines.
Why Is Estate Planning Important?
If a senior passes away without a will or trust, the government can decide what happens to one’s possessions, property and money. And it may not be what the senior would have wished.
- It lets the senior choose which family members receive property.
- It ensures that after death, any property transfers occur smoothly.
- It minimizes the amount of taxes that will have to be paid on property transfers.
- It sets forth all the funeral arrangements.
- It ensures that any business held by the senior keeps operating without interruption.
An estate plan gives the senior and their families peace of mind.
Sources: Nolo.com, SeniorsandHealth.com