Downriver Estate Planning: Wills vs. Estate Plans
Downriver estate planning attorney Derek Jacques explains the differences between drafting a will and having a comprehensive estate plan. While you might think you don’t have enough assets to have an estate plan, chances are having a complete estate plan will be in your best interests.
What is a Will?
A will is a document that disposes of assets upon someone’s death. For example, we have all seen movies or TV shows where a will is read by an attorney to the family and friends of someone that is recently deceased. Wills are exactly what you think they are, a list of where your assets end up once you pass away.
Wills are a basic legal document, and are often confused with estate plans. However, a will is also an essential component of an estate plan, so it is understandable how the two can be conflated. To better understand a will and its role in estate planning, let’s explore what an estate plan is.
What is an Estate Plan?
An estate plan, in contrast to a will, is a more comprehensive set of legal directives that can apply both in life and in death. A will is only in effect upon your death.
A will is a component of an estate plan, but other documents also play an essential role in your estate plan.
Advanced Medical Directive
An estate plan would contain an advanced medical directive (sometimes called a ‘living will’). This is a document that provides instructions for medical care in the event of your incapacitation. Without an advanced medical directive, your family could end up in a legal battle, such as the family of Terri Schiavo underwent.
Healthcare Power of Attorney
Choosing those that will make your medical decisions can be difficult. However, your estate plan will also have a healthcare power of attorney. This enables a designated person/persons to sign on medical decisions, should you end up in a coma, or on life support. Again, another document that would have helped the Schiavo family. Medical powers of attorney are limited to medical decisions, and if you need someone to make financial or legal decisions, then you’ll want a durable power of attorney as well.
Durable Power of Attorney
Your estate plan would also include a durable power of attorney. This enables you to designate someone to make financial and legal decisions in the event of your incapacity to do so. Small business owners or those with investments will want to have this particular document kept up to date. You may choose one of your children, a close friend, or a spouse to make these decisions.
Beneficiary Designation Forms
If you have retirement accounts, such as 401k’s or IRA’s, then you will want to have a beneficiary designation form filled out. This will let your financial institution know who should receive your benefits upon your death. Many of these forms allow for multiple primary beneficiaries, as well as alternate beneficiaries. Let’s say you had designated your spouse to be your primary beneficiary, but your spouse passes away before you. Your alternate would then become the primary beneficiary. If your documents don’t stipulate this, then you should update the document every time a major change occurs.
If you have minor children, then guardianship designators are a must-have. This will help determine who cares for your children in the event of your death. While it isn’t a pleasant thought, it is something that needs to be considered. Make the decision carefully. It is usually best to keep children together in a situation like this, so be sure that the designee has the wherewithal to care for the number of children you have.
Letter of Intent
In the event of an untimely passing, there is much confusion among family and friends. A letter of intent can help clear up the uncertainty. This informal document will spell out financial and health matters for everyone to understand. Explaining where important documents are kept, where the key to the strongbox is, and other personal issues not covered by the more formal legal documents can give you peace of mind that your loved ones will know exactly what to do when the time comes.
Last Will & Testament
As you see, the will is a portion of the estate plan. This document will spell out where assets are to be bequeathed, such as your home, savings accounts, heirlooms and other items. The will is but one small piece of a comprehensive estate plan. As life has become more complex, having a more robust set of directives in place is essential.
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