An “estate plan” is an umbrella term for any type of plan that is put into action when an individual passes away or becomes incapacitated. When someone plans their estate, it means that they could be doing one or many of the following things:
- Drafting a will
- Designating a power of attorney
- Establishing a trust for their children or grandchildren
- Transferring business ownership to an heir
- Creating a plan for end-of-life care
- Making arrangements for child custody in the event of your untimely passing or incapacity
There are many reasons why someone may want to plan their estate. For some, it provides a way to protect assets and ensure that they go to the right people after an individual’s passing. For others, estate planning is medically-motivated. They want to specify the type of care they receive once they are no longer able to care for themselves.
Benefits of Estate Planning
Effective estate planning not only distributes an estate holder’s assets according to their wishes, but it also allows their beneficiaries to receive their inheritance without fear of having it taken from them by third parties, such as creditors or the IRS.
If done right, estate planning can also preserve your beneficiaries’ right to privacy and mitigate the risk of probate. This means that instead of having to go to court to determine who gets what, your beneficiaries will receive their inheritance privately and without conflict.
Lastly, estate planning preserves your rights, even when you are unable to assert them for yourself. It gives you complete control over how and where you will be spending your final years, what types of care will be available to you, and who has a say in your medical and financial affairs.
Why is Estate Planning Important for Children with Disabilities?
In most states, specialized trusts exist to help protect individuals with disabilities and special needs. These are called Special Needs Trusts, or Supplemental Needs Trusts. Special Needs Trusts are often designed to allocate income to individuals with special needs who cannot fully care for themselves. While many types of trusts allow beneficiaries to receive income without scrutiny, a Special Needs Trust allows these funds to be distributed slowly over time and be used only for certain things such as food, rent, or medical care.
Another important benefit is that income originating from a Special Needs Trust is not counted against a beneficiary’s eligibility for government assistance. A beneficiary can receive income from the trust and through disability checks at the same time.
Five Most Important Estate Planning Documents
Estate planning professionals typically consider these to be the five most important estate planning documents:
- Last Will and Testament: Specifies how you want your assets to be distributed after your death.
- Trusts: Allow you to transfer your assets to a trustee of your choosing who is legally obligated to distribute your assets according to your wishes.
- Durable Power of Attorney: Allows you to appoint someone to make financial and legal decisions on your behalf if you become incapacitated and unable to make decisions for yourself.
- Healthcare Power of Attorney: Allows you to specify your wishes regarding medical treatment, end-of-life care, and organ donation, as well as appoint someone to make medical decisions on your behalf if you are unable to communicate or make decisions for yourself.
- Beneficiary Designations: Allows you to ensure assets like life insurance policies, retirement accounts, and certain bank accounts are transferred directly to your chosen beneficiaries without being subject to probate.
Additional Important Estate Planning Documents
Here are just a few more examples of other important estate planning documents:
- Letter of Intent: This is a non-legally binding document that provides guidance and instructions to your executor, trustee, or beneficiaries regarding your wishes that may not be specified in your will or trust.
- Guardianship Designation for Minor Children: If you have minor children, it is crucial to designate guardians in your will in the event of your death.
- HIPAA Authorization: A HIPAA (Health Insurance Portability and Accountability Act) authorization allows you to designate individuals who can access your medical records and communicate with healthcare providers on your behalf.
- Prenuptial and Postnuptial Agreements: If you have significant assets or a blended family, a prenuptial or postnuptial agreement can be an essential estate planning tool to protect your assets and clarify the distribution of property in the event of divorce or death.
Ask an Attorney About Estate Planning
If you are feeling apprehensive about the complexity of planning your estate, talking with an estate planning attorney can help. Estate planning attorneys can help you anticipate any possible shortcomings of your new or existing estate plan, as well as help you remedy any issues as they come up.
