When you hear the term “estate plan,” what comes to mind? Something that’s reserved for the very wealthy, or those with a large amount of property or valuable assets? While this is a common belief – it is simply not accurate.
Estate plans are vital for anyone who has family they want to ensure is cared for after they pass. Getting to know more about estate plans and what is included in them can help a person better understand why they are so important.
If you die and don’t have a valid will in place (which is part of any estate plan), your property passes by “intestate succession” or intestacy to the individual’s heirs according to the current state law.
Put simply, this means if you don’t have a will, then the state essentially makes one for you. Each state has laws in place to determine what happens in these situations. The objective of intestacy is to distribute your wealth in a way that represents how the average person would do this, if they had created a will.
Unfortunately, this may differ greatly from what you wanted. Even if others know what you intended, without a will, no exceptions are made.
One of the main parts of your estate plan is your will. A will is a type of legal document that makes your wishes regarding the distribution of your property and the care of your minor children known. If you want to improve the chances that what you want is carried out after you pass, you need a will in writing, signed by you along with your witnesses.
Another key component of any estate plan is trusts. Trusts can be created during a person’s life or created by the will they leave behind. After assets are put into a trust, they belong to it, not the trustee and have to be managed according to the trust contract’s instructions.
There are two main types of trusts:
- Revocable: This is created while you are alive and can be changed, modified, altered or completely revoked. These are often referred to as living trusts.
- Irrevocable: This is a trust that can’t be revoked, modified, changed or altered after it is created. Not even the trust maker is able to take the property out of the trust that is created.
Each of these have their pros and cons, which you can learn more about by speaking with an estate planning attorney.
Powers of Attorney
When creating your estate plan, you may also create various types of Powers of Attorney. These are legal documents that allow you to appoint another person to control your affairs if you are no longer able to do so yourself. The person who is appointed to this position is the agent, or attorney-in-fact. There are several types, which include:
- The Durable Power of Attorney
- The Non-Durable Power of Attorney
- The Limited or Special Power of Attorney
- The Medical Power of Attorney
- The Springing Power of Attorney
If you are interested in creating an estate plan that consists of some or all of the items here, be sure to reach out to a professional like The KC Estate Planner. They can determine what you need to take care of your family and your assets after you pass away.