Wills, trusts, powers of attorney — what do all these things mean? No question, estate-planning jargon can be confusing. Yet, having a plan is an important part of your overall financial wellness. Let’s walk through some basic terms, concepts and tools to help you better understand the components of estate planning.
A Will Comes First
The first step is to have a will drawn up stating how you want your property distributed when you die. A will is the most basic estate planning document you can have. If married, your spouse will want to create their own separate will. You will each name an executor, or personal representative. The executor’s role is to oversee finances while the estate is being settled and file a final income tax return.
Protecting Your Children
If you’re a parent, you are probably concerned about who will care for your children if both you and your spouse die while they are still young. To ensure they are raised by caretakers of your choosing, you will want to name a guardian for them in your will. That way, this important decision isn’t left up to a court.
Making Wishes Clear
You may have strong feelings about your medical wishes should a terminal illness, accident, or injury prevent you from speaking for yourself, or you may not. Regardless, it is important to provide guidance to your family and loved ones in the event they are responsible for making your health care decisions. This removes the burden of trying to guess the treatment you would want.
To ensure your family and health care providers know your wishes, consider having advance directive legal documents created. These are:
- A living will, which spells out the conditions for receiving or not receiving life-sustaining treatment
- A durable power of attorney for health care (sometimes called a health care proxy) authorizing a trusted person to make medical decisions for you if you’re unable to make them yourself
You can also have a durable power of attorney for finances, naming someone else to act for you in financial matters if you are incapacitated.
Is a Trust Right for You?
Did you know that spouses can pass unlimited assets to each other free of federal estate taxes through the unlimited marital deduction? It’s true! However, if your intent is to pass your estate on to your children or others, you might consider placing your assets in a trust, which can provide tax savings to the beneficiaries. For more information on trusts and estate planning, check out the Facebook Live video.