Most of my posts are intended to inform, tell an interesting story, or share interesting facts related to estate planning in some way. Of necessity, some posts assume a certain level of understanding about estate planning. But some people visiting my blog could be confused if they do not have the assumed level of knowledge. So from time to time I will take a step back and define a term that I use over and over again.
Today, I want to define what is meant by the term “estate plan“. An estate plan is a set of legal documents that serve four basic purposes. First, directing how your property is distributed after you pass away. That means specifying in a legally enforceable manner who inherits what; the timing for the inheritance; any stipulations or conditions you want to apply; and who is in charge of carrying out your wishes after your death.
Second, directing what happens if you become incapacitated. This involves naming a Power of Attorney Agent. The POA document includes powers and authority for the Agent to act on your behalf. That authority continues until your death, when the Executor under your Will or Trustee under your Living Trust will assume responsibility for assets that don’t have a pay-on-death beneficiary.
Third, the legal documents of your estate plan will authorize someone to make medical decisions for you if you are unable to speak competently for yourself, and access private health care information on your behalf. These documents also specify your wishes about artificial life support if it would only serve to prolong the process of dying and would not cure you or return you to good health.
Last, to nominate a guardian for minor children to be appointed by a probate judge. The guardian will step into your shoes and have your rights and obligations as parent to your minor children. If there is no trust set up for the money you leave your minor children, the guardian will also take over management of the money for the minor children until they reach age 18 years, at which time the guardianship terminates and the child receives control of the money — ready or not! If you establish a trust to receive or hold the money for your young childen, then you can have much greater control over the timing and circumstances for release of the inherited wealth to your children as well as who is in charge and makes decisions for them.
That is what we call your estate plan. All of the purposes are important. The details of each person’s estate plan are different and specific to each person’s family, goals and circumstances. Thus the challenge is in the details of how the plan will work.
If you have any more questions about what an estate plan covers, please respond to this posting with comments. Or if you would like me to explain other terms relating to estate planning, let me know. Thanks!