In the eyes of many, the term “estate plan” is synonymous with a last will. However, a last will is a specific legal document that provides direction for the distribution of your assets after your death, while an estate plan is a comprehensive collection of documents that addresses not only your assets and death but also medical issues that you might experience in the future.
Considering your personal circumstances and determining which estate planning documents would most benefit you and the people you love is an important step early in the estate planning process.
A last will or a trust
Most people will manage the transfer of their assets at the time of their death through the creation of a last will. However, a trust can provide many of the same benefits of the last will while also giving the planner more control over who uses what and why.
Trusts are beneficial for individuals with large estates, individuals who worry that they may need to qualify for Medicaid and those who think that their family members could eventually contest their estate plan.
Advance medical directive
An advance medical directive is a document that provides your instructions, preferences and guidance about medical decisions made on your behalf. If you suffer a blow to the head and slip into a coma or experience a stroke, the people you love may have to make decisions about the care that you receive. A medical directive takes the guesswork out of this process and makes it easier for your family to follow your wishes.
Power of attorney documents
There are multiple kinds of power of attorney documents that people can execute, although the most common are likely medical, financial and durable. A medical power of attorney goes hand-in-hand with an advanced medical directive by naming people who have the right to make medical decisions for you when you can’t.
Financial power of attorney documents allow people to access your assets or bank account to make transactions on your behalf. Empowering someone to pay your utilities, mortgage and taxes, for example, is a common use of a financial power of attorney document.
Finally, a durable power of attorney allows you to name someone to act in your stead if the courts declare you permanently incapacitated. Other forms of power of attorney lose their authority when the courts declare someone unable to handle their own affairs. A durable power of attorney persists.
While these are the most common documents included in the state plans, you may find the need to include other documents, such as business succession plans or even guardianship designations for your children. Talking about your family’s circumstances, your assets and other concerns now with someone experienced in estate planning can help you get the right documents in place to protect yourself and the people you love.