Estate Planning Should Be a New Year’s Resolution
Estate planning isn’t usually what we think of when we think of New Year’s resolutions. However, much like your physical health is improved by diet and exercise, your future will be improved with a proper estate plan in place.
What is an Estate Plan?
Almost everyone has an estate. An estate is essentially composed of everything someone owns. This includes physical possessions, such as their home and cars. An estate would also include such assets as checking and savings accounts, 401k and other retirement accounts, and life insurance policies. If something has value, it is part of someone’s estate.
An estate plan is a legal document that specifies the way these assets are distributed upon the death of the owner. The most common estate planning documents are wills and trusts. However, a proper estate plan may include several documents.
Documents in an Estate Plan
A will provides instructions to the probate court on how to distribute the assets. Your executor or personal representative (such as a downriver estate planning attorney) will ensure all final expenses are paid, and then bequeath the assets to their appropriate beneficiary. In the unfortunate event that a parent passes on while their children are still minors, a will would also designate guardianship of the minor child.
A trust sets money aside for a specific purpose and identifies both the trustee who will manage your assets and your beneficiaries who will receive them at a specified time. A trustee may be any person or an institution (like a bank or other corporate trustee). It is the trustee’s job to manage the funds or property in the trust according to the wishes of the person who establishes the trust, known as a grantor. The beneficiaries are the individuals or charities who the grantor wishes to receive distributions as laid out in the trust agreement. Normally, a properly prepared and funded trust ensures that an individual’s estate plan wishes will be carried out without the involvement of the probate court.
If you are wishing for someone to act on your behalf in the event of incapacitation, then your estate plan should include a power of attorney designation. As we have discussed, it is a common mistake to not have this document updated. You may wish to designate a different individual for medical decisions than you do financial decisions. This is not necessary, but is common for various reasons.
Your estate plan may also include a DNR, or do not resuscitate order. This document essentially tells healthcare providers not to perform emergency services in the event that your heart stops beating or you stop breathing. This must be signed off with your doctor.
You may also designate a funeral representative. This individual will be the decision maker when it comes to your final wishes. Almost everyone wants to pass from the earth with their most personal wishes carried out to their specifications. This document will enable someone you trust to handle your funeral arrangements.
More recently, access and management of digital assets has become a document in estate plans. This document authorizes the appointed individual to access, manage, copy, distribute, deactivate, and delete an individual’s digital assets. Digital assets include online accounts, email, travel reward programs, mobile phone information, electronically stored photographs, eBay accounts, Facebook, LinkedIn, and other social media accounts, and commercial websites as provided in the Michigan Fiduciary Access to Digital Assets Act. Having access to this digital information can be critically important with respect to managing finances, paying bills, accessing bank and other investment and retirement accounts, and communicating with individuals after a family member’s death.
A list of assets will almost undoubtedly be included in any estate plan. This will guide the management of your affairs should you become incapacitated. There may also be a separate list of your digital assets.
Life insurance policy. Whether you have term or whole life insurance, this will invariably be a part of your estate plan. Some policies, known as final expense insurance, will handle the funeral costs and other items after you pass on.
Retirement accounts will most likely be incorporated into your estate plan. This will assist in a smooth passing on of these accounts after your death.
These documents, and more, can all be a part of a strong estate plan. With so much to think about, it is a smart decision to meet with a downriver estate planning attorney to discuss setting up your plan and also the tax implications of your decisions.
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