What is an estate plan? (And do I need one?)

Jul 5, 2021 | Trusts, Estates & Wills

Estate planning is essential to protecting your assets and beneficiaries upon your passing. If you own a home in California or own over $150,000 in assets (i.e., bank accounts, stocks, cryptocurrency), then you should strongly consider an estate planning package. Having these documents in place will avoid the process of probate which can take years and cost thousands of dollars. Estate planning also allows you to control how and to whom your assets are distributed upon your passing.

What does an estate plan include?

A full estate plan includes a living revocable trust, a pour-over will, an advance healthcare directive, a HIPAA release, and a durable power of attorney. Even if you do not own over $150,000 in assets, these documents are important to protect you in the event that an accident or illness occurs.

Living Revocable Trust

A living revocable trust, more simply known as a revocable trust, is a document that determines how your assets will be handled during your lifetime and after your passing. You (the grantor) may place any assets you have in the revocable trust and those assets are then transferred to your designated beneficiaries (individuals or organizations) upon your passing. The revocable trust can be changed, amended, or revoked at any time during your lifetime and avoids probate by having a successor trustee pass your assets to your beneficiaries without having to wait for a court order.

Pour-Over Will

A pour-over will is a will that transfers property or assets held at your death to the trustee of your revocable living trust. The pour-over will is a “catch all” of non-trust property or assets that you own at the time of your passing and is an extra layer of protection for your assets. If you have children, the pour-over will also ensure that your children are protected, and you may appoint a guardian for your minor children.

Advance Healthcare Directive

The advance healthcare directive allows you to determine how you want medical decisions to be made for and about you in the event that you are unable to make the decisions for yourself. You can also appoint an agent who will use the advance directive as a guide to make decisions according to your wishes.

HIPAA Release

The HIPAA release works in tandem with your advance healthcare directive and allows an agent to access your medical records and information. Your medical history and information are private and protected by law, and this document will authorize your agent to receive important information related to your health.

What is a Durable Power of Attorney?

The durable power of attorney is a document in which you select an agent who acts as an “attorney-in-fact” and acts on your behalf in business or financial matters if you cannot act yourself. This document protects you from being declared incompetent by the court and allows your family or designated attorney-in-fact can take care of your finances or business without a court order.

Reasons why people need a durable power of attorney

Your attorney-in-fact will be able to make financial decisions on your behalf should you become incapacitated or unable to make those decisions for yourself. These responsibilities may include buying and selling property, filing tax returns, and managing bank accounts and investments. The attorney-in-fact will assume these responsibilities should you become incapacitated, and the power is removed or revoked once you regain capacity.

Do I need a durable power of attorney?

Yes! Everyone should strongly consider having a durable power of attorney in place regardless of age. No one plans to be in an accident or become ill; however, there is a possibility it could happen, and you want to protect yourself as early as possible in the event that an accident or illness occurs.

It’s important that you select someone who can act as a trustworthy and responsible attorney-in-fact. It is equally important to think of one or two alternate attorneys-in-fact in the event that your selected agent is unable or unwilling to accept the role or responsibilities.

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