Estate planning involves determining who has authority to make medical and financial decisions on your behalf if you become unable to handle these decisions and how your property will be distributed upon your death. All property that you own is part of your estate, and you have the right to determine who receives each piece of property. Your estate plan may be as simple as creating a living trust or a will, or you can create a plan to guarantee that certain assets avoid the probate process altogether.
Your will is the document that contains who will receive some or all of your property at your death. Your will allows you to designate an executor of your estate and successive executors. The executor of your estate is responsible for administering your estate and overseeing the probate process. The will also provides an opportunity for you to inventory all your assets and designate the beneficiaries of different categories of personal property, real property, bank accounts, shares of stock and any other property that you own. After the will is created, you may choose to keep it in a safe location with your designated executor or with an attorney. You also have the option of creating a joint will with your spouse. A will must be admitted to probate when you die and undergo a court proceeding before your assets are distributed to your heirs.
There are several ways to transfer property before your death or make certain that specific property goes directly to your beneficiaries without going through probate. Life insurance policies and pension benefits go to the beneficiaries that you have already previously designated and are not admitted to probate. If you own property with others as joint tenants, the remaining joint tenants have rights of survivorship, which means that the other co-owners acquire your interest in the property upon your death. Bank accounts may be set up as pay-on-death accounts, allowing the account assets to transfer to a designated beneficiary.
As part of your estate plan, you may establish a trust, naming someone as the trustee and designating beneficiaries of the property. A living trust is created while you are alive, and it can substitute or replace a current will. A trust is established by creating a trust agreement and transferring property to the trust. A trust may be revocable, allowing you to cancel or make changes to the trust assets while alive. A revocable trust becomes irrevocable upon your death. An irrevocable trust is the opposite, and once an irrevocable trust is created, you relinquish your rights to cancel or amend the trust. The trustee is required to maintain the trust assets and distribute the assets to the beneficiaries when you die. Trust assets are not admitted to probate.
If you become ill, there are documents that you can create to help health care providers ascertain your intent regarding medical decisions. A durable power of attorney allows you to designate someone to make medical decisions for you, if you are unable to make these decisions. A health care directive, also called a living will, is a document in which you indicate your preferences for certain medical treatment when you are unable to make those decisions.
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