Thinking about planning for a future after we are gone isn’t very much fun, and most of us would prefer to avoid it. This is probably why less than half of American adults have an estate plan that describes how their money and estate are to be handled after their death. Having a written will can make handling your end of life expenses and circumstances so much easier. Here are the things to think about as you prepare to create your estate plan.
Key Elements of an Estate Plan:
Here are the key elements that go into an Estate Plan that you can be thinking about now.
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A Will
A will is a key part of any solid estate plan. It lays out who you want to take over your assets when you pass on (cash, real estate, stocks etc.) and ensures that they are distributed as you want them to. If you have young children your will also stipulate who you want to serve as guardian for them if you and your spouse become incapacitated.
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Trusts
Not every estate plan will include trusts, but they can be a good option if you are hoping to avoid what is called probate. Probate is a legal procedure that your estate goes through after your pass away. During this process, a court will start the process of distributing your estate to the proper heirs. In most states, the probate process is quick and painless, including in Washington & Idaho. In some states, such as California, it is costly and takes a great deal of time. So depending on where you live you may want to establish a trust to avoid the probate process.
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Power of Attorney
A power of attorney (POA) allows you to choose someone to step in and manage your finances should you become incapacitated. This document is especially important for single adults since there may not be a spouse or significant other who can immediately step into the role. There are three main types of Power of Attorney:
- General POA: In this situation the agent (the person who has POA) can perform almost any act as the principal (the person who granted the power of attorney). A general POA ends when the principal becomes incapacitated, revokes the POA or passes away.
- Durable POA): A durable POA includes everything that a general POA but includes a clause that continues the POA after the principal becomes incapacitated. This is the most common POA in estate planning.
- Special or Limited POA: this type of POA grants an agent specific powers limited to a certain area. For example a POA might grant an agent authority to sell a home or other piece of real estate, but not conduct other financial transactions.
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Health Care Directives
Health Care directions handle your medical decisions. You can choose to have a living will, that lays out your instructions for care should you become incapacitated, or a health care proxy, which designates a person who will make medical decisions on your behalf. If you are concerned that family members may disagree about your care, having these documents in place is essential.
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Beneficiary Designations
Finally, beneficiary designations are found within retirement account and life insurance policies. They aren’t included in your estate plan directly but are an important element of it. These designate who will receive the benefits in those accounts when you pass, and they supersede what is in your will. You can change these directly with your retirement account and life insurance providers. It is good to check your beneficiary designations each calendar year.
Should you use an attorney, or not?
There are some solid online sites where you can create your own will. If you are looking for an online option consider Legal Zoom, and Rocket Lawyer. However, if you have a complex estate including real estate, a business, multiple heirs etc. an attorney will be the best way to go. You can get all of your questions answered and it is easy to make changes as needed.
If you are looking for a local Spokane attorney to connect with, Michelle Fossum at Sayre, Sayre & Fossum is one of the best. She specializes in estate planning and provides excellent, affordable options for our members. You can reach her via email at michelle@sayrelaw.com or at 509.325.7330.
You’ve worked hard to build your financial life, establishing or updating your estate plan is a great way to protect it. Start your plan today!