Everything You Need To Know About Wills And Estate Planning

By Michael Diaz. May 7th 2016

Planning what will happen to your financial assets after you pass away is an activity that most people dread. However, prudent estate planning is something that everyone should consider to prevent disputes and confusion after they die. While estate planning can seem overwhelmingly complex, there are only a few legal documents that you need to put in place in order to successfully create an estate plan that will carry out your financial goals after you move on.

Creating A Will

What It Is

A will is a legal document that explicitly stipulates what will happen to your assets after you die. It also allows you to select a guardian for your dependent children should you pass away before they become legal adults. Wills can be amended at any time. Therefore, it is wise to periodically review your will and amend it as necessary. Common reasons for amendment include marriage, divorce and the birth of a child.

Why You Need One

Everyone should create a will regardless of your income and personal wealth. Wills are especially important if you are married or if you have children. A will is the only way you can make sure that your assets will be distributed in accordance with your wishes. For example, if you want your assets to be equally split among your three children, you can stipulate that in your will.

On the other hand, if you want all of your money to go to your favorite charity, a will can make sure that your family does not interfere with your wish. Without a will, state law decides how your assets will be distributed. Therefore, dying without a will can cause conflict among your remaining family members if they engage in legal battles over the distribution of your assets. It can also enable the government to tax significant portions of your assets before they are distributed to your family.

In addition to specifying how your assets will be distributed, a will also allows you to select a guardian for your dependent children in the event that both you and your spouse die unexpectedly. Do not assume that a verbal agreement with a family member or friend will allow them to become your children’s guardian in the event that you and your spouse die. Unless your will explicitly names a guardian for your children, the state you live in will decide who will raise them in the event of your death.

How To Get One

There are two easy ways to create a will. The first is to hire an attorney to create one. This can cost up to $1000. Alternatively, you can create a will online for much cheaper. This will allow you to save on attorney fees. Websites like LegalZoom.com can help you to write and enact your will for less than $100.

Living Will

What It Is

In addition to setting up a will, you might also want to consider setting up a living will. A living will is a legal document that lays out what kind of medical treatment you wish to receive in the event that you become incapacitated and cannot personally express your preferences. This will help to ensure that your wishes will be followed by your doctors. It also protects your family from having to making tough decisions about keeping you on life support. You can also name a healthcare agent in your living will. Doing so will allow your agent to make medical decisions on your behalf if you are unable to communicate. If you do this, make sure to select someone that you trust as he or she will be responsible for carrying out your wishes.

Why You Need One

If you are severely injured and fall into a coma or if you become severely ill and cannot communicate, a living will can inform your doctors if you wish to be kept alive on life support. In the absence of this will, your family or your doctor might make a decision that is against your wishes.

How To Get One

You can create a living will by hiring an attorney or by doing it yourself online. For those who want to save money, the online option can be done for less than $100.

Assignment Of Power Of Attorney

What It Is

A legal document that allows you to select someone that you trust to manage your financial affairs in the event that you become incapacitated and can no longer handle them. A power of attorney allows your agent to pay your bills, manage your investments, and make all of your financial decisions. There are two types of power of attorney. One is the springing power of attorney which only goes into effect under specific circumstances that you specify. This often requires that your agent prove to a court that you are incapacitated before he or she is granted the power of attorney. The second type is called the durable power of attorney and it goes into effect immediately.

Why You Need To Do It

If you become incapacitated, you will need someone to manage your finances. Assigning power of attorney to someone you trust will help you avoid financial ruin in the event that you can no longer control your personal finances. If you become incapacitated without a power of attorney, a court can appoint someone to make decisions for you.

How To Do It

You can create a power of attorney by hiring an attorney or by doing it yourself online. For those who want to save money, the online option can be done for less than $50.

Trusts

What It Is

A trust is a legal mechanism that allows you to stipulate what happens to certain owned assets after you die. Because only certain assets can be placed in a trust, it is not as comprehensive as a will. Therefore, many people who create trusts also have a will as well. Assets placed in a trust can include life insurance policies, real estate, art and other financial assets.

Why You Need To Do It

Trusts are typically created to reduce the taxes that must be paid on your financial assets after you die. The government will heavily tax the money and other assets that you leave to the beneficiaries of your will. Therefore, if you want to maximize the value of your assets for your beneficiaries, you might consider setting up a trust. Trusts also allow people to put conditions on when and how their assets are distributed. Assets held in a trust are also often safe from creditors and lawsuits.

How To Set One Up

Because they are complicated and can be tailored to your specific situation, you should hire an estate planning attorney to set up a trust. A basic trust can cost $3000 or more depending on its complexity. However, the creation of a will and living will is often included in this cost.

While estate planning is an activity that is almost never relished, it is necessary to make sure that your finances and your family are taken care of after your death. It also ensures that your preferences are followed by your lawyers and your doctors in the event that you become indefinitely incapacitated.

Sources

New York Times

CNN

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