Practically everyone knows what a will is, most know why it is important, and some have taken the steps necessary to have a will prepared and executed. However, many people are unfamiliar with the other estate planning tools that are available and that should be part of every estate plan.
Trust: If you have minor children, it is important that your plan include a trust for their benefit. The purpose of a trust is to provide for the children over a period of time. The trustee designated in the will has the responsibility to make sure funds are disbursed when necessary for the support of the child. This ensures that the funds will be used properly and for the items you determine are important, such as education or health care expenses. A trust is also effective for a disabled beneficiary. In addition, it may be used as a means of paying a beneficiary’s distribution of the estate over time instead of all at once.
Durable Power of Attorney: This tool provides that in the event you are incapacitated, a designated person is given authority to make certain legal and financial decisions on your behalf. The person would be able to pay your bills and carry out basic functions on your behalf to keep your matters in order while you are incapacitated.
Health Care Power of Attorney: Like a durable power of attorney, the health care power of attorney allows a designated individual to make decisions on your behalf. The difference is that this tool involves medical decisions, such as choice of health care providers and when to discontinue medical care. It also grants the designated person access to your medical records and the authority to grant consent to certain types of care. Most of the decisions that are likely to arise can be determined ahead of time in the health care power of attorney.
These estate planning tools are essential to every plan, whether you are wealthy or lack substantial assets. The documents not only protect you, but also your loved ones that you leave behind or for whom you can no longer provide as a result of incapacitation.