Estate Planning 101
The certainty that the only certainties in life are death and taxes has existed almost since time immemorial. These certainties are a fundamental part of life and a person should not shy away from these tough issues simply because they are tough. Nobody likes to think that they will die eventually, but it is incumbent upon each and every person to plan for this event. The first and best way to plan for these certainties is by creating an estate plan.
An estate plan is a set of documents that help you plan for those certainties. The phrase “estate plan” sounds like a complicated set of material that only very wealthy people need, but in fact it refers to the documents that almost everyone needs, whether their financial and familial affairs are simple or complex.
All of the documents that comprise an estate plan help people avoid problems that often arise upon death. Many of these are problems that people never think about during life, or which, feeling overwhelmed by the problems, push out of their minds. However, in the absence of an estate plan, these issues will be resolved by the courts and state law, and consume up to 8% of your estate in administration and legal costs. Additionally, without proper planning, the Federal Estate or Death Taxes may consume up to 46% or more of your accumulated wealth.
Therefore, a properly-prepared estate plan will let each person decide for himself or herself the best choices for their own families, such as who should receive their property and when, who should have the power to make decisions for me when I can't, and who should wind up one’s affairs. Additionally, a properly drafted estate plan can protect your assets from lawsuits, creditors, and Medicaid recovery.
Estate planning also means planning for your last illness. An advance health care directive explains the sort of healthcare treatment that you would like to receive before your death. There is a great deal of variation in how we choose to make decisions at the end of our lives, and an advance directive on healthcare can give voice to our own preferences.
Finally, a proper estate plan includes a document that authorizes a family member or a trusted friend to care for you and oversee your finances if you are no longer able to care for yourself. A person should always have the ability to determine what type of care they receive. Without these documents, a person runs the risk of having these decisions made for him or her, and not necessarily in accordance with his or her wishes.
Please note that this article is a general summary of law and omits many important details, footnotes, and caveats. It is no substitute for legal advice from a lawyer based on your particular circumstances.