The Five Essential Estate Planning Tools
1. Last Will and Testament
This Estate Planning Tool allows you to specify “who gets what” when you pass away. Without your own Last Will and Testament, your assets will be distributed according to state guidelines. A Will also allows you to name guardians for your minor children. This is important because if something happens to you and your spouse, the state will decide who will have legal authority over your minor children. This could very well be a person or institution you would never have chosen to have such authority.
2. Durable Powers of Attorney
These allow you to name people of your own choosing to make decisions for you in the event of incapacity. A power of attorney for healthcare lets you designate a person you trust to make decisions about your medical care, while a power of attorney for finances lets you name the person you want to make financial and legal decisions on your behalf.
3. Advance Directives
An advance healthcare directive, also known as a living will, allows you to choose, in advance, the types of medical treatments you want (or don’t want) in an end-of-life situation.
4. HIPAA Authorization
The Health Insurance Portability and Accountability Act (HIPAA) established national standards to protect the privacy of patients’ health care information by regulating the use and disclosure of “protected health information.” A HIPAA Authorization ensures your loved ones and decision makers can gain access to medical information about your condition when they need it.
The last estate planning tool is Trusts. There are many types of trusts, capable of helping you accomplish a variety of goals. However, when most people think about trusts, a Revocable Living Trust is the one they have in mind.
A Revocable Living Trust allows you to maintain complete control over your assets while you are alive and after you have passed away. You don’t have to transfer your assets to the trust all at once, you can do so over time and even add to the trust as you acquire new assets.
Other benefits of a Revocable Living Trust include:
- Avoiding probate. The probate process is time-consuming, needlessly expensive and exposes your assets and estate to public scrutiny
- It can be changed over time, to compensate for changes in your financial and family situation
- Basic wills can lead to disagreements among family members. A Revocable Living Trust can help eliminate challenges to the will and ensure beneficiaries receive what you have intended for them
- It allows for ongoing financial management. As your wealth accumulates, so too will assets in the trust