When you think of an Estate Plan, you might think of Millionaire families and Trust funds. While estate planning can be very complex and planned for many generations, it is also quite simple and important for most families to have.
Although all Estate Plans are unique and tailored to each family’s specific needs, they usually contain the basic documents:
- Revocable Living Trust
- Last Will and Testament
- Advanced Healthcare Directive
- Financial Power of Attorney
Here is an overview of Estate Plans:
What is a Living Trust?
A Living Trust is a legal document that designates who will manage your assets and who will receive them after you pass away. Sounds simple enough? That’s because it is! The hardest part of creating a Living Trust is to decide who you want to name as Trustees (the individuals that will be responsible for managing your assets) and Beneficiaries (the individuals who will inherit your assets).
Why are Trusts important?
- If you have children under 18, a Trust will ensure that they are financially taken care of. You can also determine at what age your children will fully receive their inheritance, such as age 25 or 30.
- If you own a home (especially in California), a Trust will bypass Probate court. The minimum fee for Probate in California is $23,000 for a $1 Million estate.
What is a Will?
Most people picture their family sitting around a law office while an attorney performs the “reading of the Will”. This can’t be further from the truth.
A Will is a legal document that determines your final wishes, including who will be the guardians for your minor children or who will inherit your jewelry collection. While it is important to ensure that you have a Will, these documents are still subject to Probate, which can be long, public, and costly.
What is a Healthcare Directive?
An Advanced Healthcare Directive is a legal document that will determine your wishes if you become incapacitated, such as going into a coma or not being able to speak. Some of these decisions include whether or not your want to receive CPR, be kept alive on a ventilator, or receive artificial nutrition.
Advanced care planning also covers any funeral or burial wishes you have. While this isn’t the most pleasant discussion to have with your family, it is important to make your wishes known and have a plan in place so that your preferences are followed.
What is a Power of Attorney?
A Power of Attorney is a legal document that designates someone to be in charge of your finances. This can either be immediately or upon you becoming unable to. You can also determine whether they have full control of all your finances, or can only help with specific things, such as managing a rental property or selling a business.
A Power of Attorneys is a vital document that goes hand-in-hand with your Healthcare Directive. For example, if you are injured and in the hospital, you will likely still have bills and taxes that need to be paid. Designating a Power of Attorney can help ease the stress and burden of managing your finances while you are incapacitated.
Creating an Estate Plan is an important feature of every family’s Financial Plan. If you would like to work with a financial planner to walk you through your options, I would love to help you!
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Disclaimer: This blog is for informational purposes only, and should not be considered advice or recommendations. All opinions expressed herein are solely those of Amaral Financial Planning, LLC, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made to another parties’ informational accuracy or completeness. You should consult your financial advisor, tax professional or legal counsel prior to implementation.