There are several myths surrounding estate planning that you should never listen to. A primary one is that only the wealthy need to have an estate plan. All adults, whether they have living family members or not, should have a complete estate plan that outlines several points.
There are three primary things that your estate plan should accomplish: outline what assets go where when you pass away; set a plan for your medical care in your final days; and give someone you trust the ability to handle your finances and health care decisions. Adults who have minor children also need to have a fourth component, a guardianship designation.
Will and trusts
Your will and any trusts you establish relay the plan for your assets when you pass away. Remember, the will is going to have to be filed in court and becomes public record in most cases. Trusts are more private and public access isn't a factor. Establishing trusts can help you to meet specific goals, such as protecting the ability for a person who relies on needs-based assistance to keep getting it if you use a special needs trust. Other types of trusts can do different things, including protecting assets from creditors.
Your living will, or advance directives, specifies your wishes about specific medical care that you will or won't accept. It is important to carefully consider the contents of this document because it is written specifically for your medical team. If you don't want to be resuscitated, you need to have a specific Do Not Resuscitate order on file. Other decisions to think about include what types of assistance you want, whether you want intravenous nutrition and what types of life saving measures you will accept.
Powers of attorney
There are two different types of powers of attorney. The health care power of attorney works in conjunction with your living will. The person who holds this power will make any decisions not outlined by that document and will work closely with medical staff to ensure your rights are being respected. The financial power of attorney gives the designated person the ability to pay bills for you and make other decisions about financial matters. Remember that that powers of attorney will only go into effect if you are unable to make decisions on your own.
If you have minor children, you will need to set up a guardianship. This is the person who will raise your children if you are unable to. You should make sure that you have a financial plan in place for them so they have the funds to take care of those needs.
Your entire estate plan works together, so make sure that yours accurately shows what you want. You'll need to review it if your life circumstances change or annually.