The term “estate plan” covers a wide range of possible documents, and everyone’s estate plan is a little different. However, there’s a core set of documents that every estate plan should have. Here’s a rundown of the estate planning documents that we generally include in all of our estate plans, as well as some optional documents that you might want to consider adding to your estate plan.
Document #1: A Will
The cornerstone of every estate plan at is the Will (officially called a Last Will and Testament). The Will is a legal document that states who will inherit your property, as well as who will serve as guardian for your minor children (if any). It also identifies the person who will serve as executor of your estate through the probate process.
Document #2: A Durable Power of Attorney
The second document in every estate plan is a durable power of attorney, which authorizes a trusted person to act on your behalf in case you become incapacitated or cannot manage your affairs. The durable power of attorney allows this trusted person (called your “agent”) to access your bank accounts and other property in order to manage your finances.
Document #3: Power of Attorney for Healthcare
The third document in every estate plan at Cross Law is a power of attorney for healthcare. This document authorizes someone to make healthcare decisions on your behalf if you are unable to make them yourself. This document also includes a declaration of your preferences for end-of-treatment (also known as a “living will”).
Document #4: HIPAA Authorization
Federal and state law limits how much information your doctors can disclose to other people. Your HIPAA authorization gives permission to your doctors to disclose medical information to specific individuals you’ve named in the authorization. This document is particularly important for unmarried individuals or parents of step-children.
In addition to the documents listed above, our estate plans can also include the following documents if appropriate for the client’s needs.
Optional Document #1: Living Trust
One of the most popular estate planning documents is a living trust. However, living trusts are not for everyone, which is why they are not included in the above list. We generally recommend that your estate plan include a living trust if you own real estate, have multiple beneficiaries, are you want to prevent your heirs from squandering their inheritance. Our trust attorney is happy to help you evaluate your specific situation and decide whether a living trust is right for you.
The primary benefit of a living trust is that your estate can avoid cost and delay of probate court. While you’re alive, you control the living trust (and therefore the property) as the “trustee.” After your death or incapacity, your chosen successor trustee will take over control of the trust without going to probate court. Assets can stay in your trust indefinitely and are managed by the trustee for the benefit of whomever you choose, such as children or a spouse. You can specify how the trust assets will be managed and spent, including protecting beneficiaries from creditors and irresponsible spending.
Keep in mind that if your estate plan includes a living trust, you will still have a Last Will and Testament. Even though a living trust comes at additional cost, most people find the cost savings of avoiding probate make it more than worth it. Read more about living trusts.
Optional Document #2: Real Estate Deed
If your estate plan includes a living trust, then we will also include a deed that transfers your house into the living trust. This takes the house out of your name personally and keeps it from having to go through the probate process after you pass away. Importantly, it does not affect your mortgage or property tax valuation.
Optional Document #3: Beneficiary Designations
Regardless of whether your estate plan includes a living trust or not, the estate planning process must include updating the beneficiary designations for property that does not pass through your estate. This includes bank accounts with a POD designation, retirement accounts like an IRA or 401(k), and life insurance policies. Failing to keep beneficiary designations up-to-date can have dire consequences after your death.
If you have a living trust, we will help you update these beneficiary designations to the name of your living trust. This way, all of your property – whether a “probate asset” or not – passes through your living trust.
Special Documents: Large Estates
Generally most people do not have to worry about “death taxes” unless they own more than $5 million of assets ($10 million if married). If you are in the position where your estate is close or exceeds these amounts, then tax planning will be a very important part of your estate plan. Some common features you might include are:
Irrevocable life insurance trust: This is a trust designed to keep your life insurance pay-out of your estate for tax purposes, and therefore avoid the 40% estate tax rate.
Qualified Terminable Interest Property (QTIP): A trust that delays estate taxes until your surviving spouse dies. This kind of trust also allows you to control who will receive the trust’s assets after your spouse dies (such as your children instead of his or hers).
Credit Shelter Trust: Also called a bypass trust, this a trust that shelters property from estate tax using your exclusion amount.
All of our flat-fee estate plans include a will, financial power of attorney, and healthcare power of attorney. We also include a living trust if it is appropriate. Other documents are included based on the circumstances. If you’d like more information, fill out the form below to schedule a free consultation.
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