Estate Planning Basics

Estate Planning is the process of planning for incapacity and death and ensures that you and your loved ones are adequately looked after. A simple Estate Plan will include three documents: a Will, a Health Care Directive / Living Will, and a Durable Power of Attorney.

The Durable Power of Attorney establishes another person or people to serve as your “Attorney-in-Fact” or “Attorneys-in-Fact” which permits them to act on your behalf in a financial capacity, even if you are incapacitated (which is why it is called ‘Durable’). This document can be effective immediately, in which case your Attorney-in-Fact is appointed and can act as soon as the document is signed. Alternatively, you can draft your Durable Power of Attorney to be “springing” in which case it will ONLY apply if you are declared incapacitated by a physician. In either event, the Durable Power of Attorney allows for your Attorney-in-Fact to access your financial accounts so that they may pay bills, pay taxes, manage investment accounts or other financial decisions. Without a Durable Power of Attorney, in the case of incapacity, a family member would need to file with the surrogate court to declare you incapacitated and to appoint a Guardian of the Estate. This is a costly and time consuming matter, and all the while you are accruing late fees. The extent of power granted to an Attorney-in-Fact may be tailored to suit your personal needs, for example: would you like your Attorney-in-Fact to continue to make birthday gifts to your grandchildren on your behalf?

The Health Care Directive / Living Will is essentially the same as the Durable Power of Attorney, except that it deals with medical decisions instead of financial ones. In this document, you appoint a “Health Care Representative” and outline your medical wishes, should you become unable to make your own medical decisions. Similar to the Durable Power of Attorney, a failure to assign a Health Care Representative can result in costly filings with the surrogate, establishing your representative as the Guardian of the Person.

The Last Will and Testament is a document in which an individual determines how their assets will be distributed after their death. Among the most important determinations is assigning a person or persons to serve as your Personal Representative (formally called an Executor or Executrix). This person will be responsible for seeing to your estate, distributing the assets, paying bills, and otherwise tying off all loose ends. A will can also ensure positive tax treatment for your estate, and recommend a guardian for minor children. Additionally, you can determine whether you would like assets to be distributed to a beneficiary outright or whether a trust should be established with those assets for their benefit. I will discuss the concerns and uses of trusts established by Last Will and Testament (called “Testamentary Trusts”) in a future post.

The old idiom “an ounce of prevention is worth a pound of cure” holds particularly true when it comes to Estate Planning. It is best not to wait until problems need to be solved when they could be all-together avoided by planning.

Call or email me to schedule a preliminary consultation.

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