By Kayla Liu
Who would benefit from an estate plan?
Everyone! You don’t need to have children or be elderly, wealthy, or in poor health to create an estate plan. This set of legal documents will make it easier for your family or friends to honor your wishes when you become unable to make decisions for yourself or pass away. Creating an estate plan may seem morbid to some, but the peace of mind is worth it.
What goes into an estate plan?
A will is a legal document that expresses a decedent’s wishes for the distribution of their estate and appoints someone to oversee distribution. Everyone has an estate, regardless of whether or not they have a will.
If you don’t have a will, your estate will be distributed according to your state’s prevailing distribution scheme. In California, a person’s community property will be distributed to his or her spouse. A person’s separate property estate gets distributed to his or her spouse and to their issue “per stirpes.” This means that each branch of the family will receive equal shares. For example, say you have two kids. If you die without a will, each kid will receive 50% of your estate. If one of your kids died before you and is survived by two children (your grandchildren), their children will split their deceased parent’s 50% share of your estate. Thus, your surviving kid will receive 50% and each of your predeceased kid’s children will receive 25% of your estate each.
If you have a will in place at the time of your death, you will be able to control who gets what. You can make specific gifts, like your prized Rolex watch to your nephew or $50,000 to your favorite dog charity. Additionally, you can nominate a guardian for your minor children. While a helpful document, if a person only has a will, their estate will still be distributed through probate court upon their passing.
A trust protects your assets both during your lifetime and after your death. There are two different types of trusts: a revocable or “living” trust, which you may revoke or change at any time and an irrevocable trust, which cannot be revoked or changed. With whichever trust you choose to create, you will appoint a trustee who will be responsible for managing the assets that you transfer into the trust during your lifetime for your benefit. When you die and depending on the terms of your trust, the trustee will either distribute the assets to the beneficiaries of your trust or continue to manage the assets for the benefit of your beneficiary. One key benefit of having a trust is, assuming all of your assets are in trust when you die, avoiding probate.
Power of Attorney for Finances
With a durable power of attorney for finances (“POA”), you can appoint someone to make financial decisions for you. The person that you choose is your “attorney-in-fact” for finances. This person steps in your shoes and manages your financial affairs. It can be useful for many things, from ensuring that your bills are paid on time or selling your house for your benefit. Because the person you appoint will have a great deal of authority, it is critical to choose someone that you trust.
You can choose to have your POA effective immediately upon signing or upon some triggering event. A common triggering event is when a doctor determines that you are incapacitated and unable to make decisions for yourself. This can be personalized to fit any situation. For example, a POA may become effective when you are deployed in another country, are incarcerated, or if you are hospitalized for long (or short) periods of time.
Advance Health Care Directive
An Advance Health Care Directive (“AHCD”), also known as a Power of Attorney for Healthcare, allows you to appoint someone to make medical decisions for you if or when you cannot. Further, an AHCD can specify your treatment preferences, which procedures and treatments should be used, when treatments should cease, and your preferences for pain management and organ donation. Your attorney-in-fact can never override your wishes. Think of the AHCD as an instruction packet for your attorney-in-fact. By having an AHCD, you can ensure that your attorney-in-fact is informed of your preferences and empowered to make medical decisions on your behalf.
There is no better time to create an estate plan than in the new year. Everyone should consider creating an estate plan to ensure that their affairs will be taken care of in the event of incapacity or death. Make things easier for your loved ones and consult with an estate planning attorney to get started on your estate plan today.