Do it yourself Will|
Powers of Attorney|
Estate planning is a broad topic that addresses how you prepare your affairs as you approach the end of your life such that your heirs can inherit your estate as you intended, as well as manage your ongoing financial matters, with a minimum of trouble. Largely, effective estate planning is a matter of preparing documents.
Your Last Will and Testament
A Last Will and Testament is the fundamental document of estate planning; preparing a will, fortunately, is an easy process that you can undertake yourself. There are many software programs and online forms that help you prepare a will. Be sure that a self-prepared will is properly notarized and filed, and leave a copy with your executor. If your will is complex and involves the disposal of many different kinds of assets, or complicated guardianship arrangements for your minor children, you may wish to at least consult with an estate attorney to ensure that the document is not ambiguous.
All wills are subject to a probate process, through probate court — this legal process ensures that your assets are distributed as you had intended. However, probate fees can be high, and the process can take time. If you have substantial assets, it may be worth placing them in a revocable living trust. This is a specific kind of trust document that allows you to continue using your assets as before — whether using income from financial assets held in the trust, deeded property such as a house, or other assets. However, the trust also does the work of a will in that it specifies who will obtain these assets once you’ve died, and thus avoids the probate process. You still need a will, but the this document will merely point to the trust document as the principal document related to distribution of assets. Unless you are an attorney yourself and have long experience with trust documents, your revocable living trust should be drafted by an experienced estate attorney.
Large estates are subject to estate taxes, but this tax burden can be lessened with proper planning. You can begin gifting your assets to your children before you die; generally, such gifts are tax free unless they exceed $12,000 per benefactor per year. However, you and your spouse can each make gifts of $12,000. Thus, if you are a couple with three children, you can gift each child a total of $24,000 per year tax free. If you wish to pass on a small business with considerable assets, another option is to purchase a term life insurance policy with a death payment that’s sufficient to pay the estate taxes on the business.
Health Care Agent
As for health care, you should prepare two documents: an advance directive or “living will,” which specifies the level of care you wish to receive should you become incapacitated and hospitalized; and a health care power of attorney, which names an agent who will make health care decisions on your behalf should you become incapacitated. Your health care agent should be a close friend or colleague (not necessarily a spouse or family member), whose beliefs about end-of-life issues are similar to yours. Your health care power of attorney should not conflict with your living will; if in doubt, consult with an estate attorney. Finally, you should prepare a power of attorney for financial affairs, naming an agent to deal with your financial matters should you become incapacitated. All of these forms can be self-prepared, using software or online forms. Ensure that the format of these power of attorney forms comply with any regulations in your home state or district.
Preparing your estate plan can be a cumbersome chore, but once the plan is in place, your heirs will have a much easier time coping.