Updated: Mar 20, 2019
Many people know that estate planning is important, yet it still goes unplanned for many families. Proper estate planning is vital for ensuring that your personal and financial affairs are in order. Depending on your personal and family affairs and the extent of your estate, the proper estate plan can vary. However, there are certain documents that every adult should have in place regardless of their financial status. Here are the vital documents you need as part of your estate plan in 2019:
We're all pretty familiar with wills. This document is used to specify and instruct how our assets should be distributed upon our death and who's responsible for making the distributions. What some may not be aware of though, is that a will does not deal with all of your assets, only the "probate assets."
Probate assets typically include things such as your cash and bank accounts, vehicles, jewelry, home, and any other items that don't have a beneficiary named. Non-probate assets include assets such as life insurance policies, IRAs, 401(k) plans, and other assets that do have specific beneficiaries named. Houses and vehicles can fall into either category, depending on how they are titled. For instance, if you and spouse both own and are on title to your home as "joint tenants with right of survivorship" then the property automatically transfers to the surviving owner when one dies. On the other hand, if only you are on title, then it would be a probate asset.
Many people often view wills as unnecessary because they either don't have extensive assets, or believe that probating their estate will be simple without a will. However, wills are important and helpful in these situations as well as for those with large fortunes or complicated intentions.
For instance, in South Carolina if there is no will then the deceased's entire estate goes to: (a) if married with children: 1/2 to the spouse and 1/2 split between all children; (b) if married with no children: 100% to the spouse; (c) if unmarried with children: 100% split between children; (d) if unmarried and no children: to the parents, or to siblings if parents are deceased; (e) more complex depending on family dynamics.
So say you are married with two adult kids. Your spouse will receive 1/2 of your estate and your two children will split the other 1/2. Easy enough, right? Well, without a will your family will have to decide how your estate gets split into halves as well as how your two children will split their half. Does the house or cars need to get sold? Who receives which pieces of jewelry? Who keeps the leather couch and who gets the artwork? Without a will, you have to either hope that your family can easily and peacefully work this out, or leave them to pay attorneys to fight over it and often rely on the court to make the determination. Alternatively, your will could specify precisely who gets which items, whether any items should be sold and who receives the cash, and who is responsible for distributing the assets. This saves your family time, headache, and costs in a time where they are likely grieving.
Whereas a will takes care of matters after your death, a living will deals with matters while you are alive (get it, "living" will?). Living wills, also referred to as healthcare directives, allow you to specify your desires for medical treatments when you are not able to communicate. Your living will identifies whether you want to be resuscitated, put on health support and for how long, and so forth.
This is a very crucial document for you and your family. Without a living will, your family may not know what treatments you wish to receive (or not receive) and may end up in a legal fight over it. With a living will, your family will have definite instructions on your wishes.
Power of Attorney
Along with your living will, it is important to provide a power of attorney. There are two sides of these powers: financial and health care. A financial power of attorney allows another person to take care of your finances, pay medical bills, communicate with creditors and banks on your behalf, and manage your investments and bank accounts. The health care powers allow the person to make medical decisions for you and have open communication with your doctors and health care providers. While you may have a living will specifying your wishes, for your spouse to make such instructions they would need power of attorney for you.
Powers of attorney come in various forms: "general" or "limited" and "springing" or "non-springing." General v limited dictates the extent of powers given to a person. For instance, if you are giving your spouse a limited power of attorney to sign mortgage documents for you on a real estate transaction only. Springing and non-springing relates to when the powers take effect. Springing powers take that name because they "spring" into effect at the moment you become incapacitated. Non-springing, or "durable," powers take effect immediately and continue to be in effect regardless of whether you are incapacitated or if you regain capacity.
The Run Down
Estate planning is not fun for anybody to think about. However, by planning ahead and making the preparations now will save your family and heirs a mountain of frustration and issues down the road. Because of their importance, it is vital to consult with an estate planning attorney to determine what you need, how your estate should be laid out, your medical wishes, and other matters which will determine the extent of your estate plans. Even if you already have an estate plan in place, it is important to routinely review them with your estate attorney to make sure that all of your assets are taken care of and any changes are addressed.
The Dills Law Firm helps our clients prepare for the future and plan their legacies. Call or email us today to schedule an initial consultation and start your estate plan.
DISCLAIMER: This post, and all posts on DillsLawFirm.com, are meant to provide basic education on a range of legal issues. Nothing written here should be construed as legal advice regarding any particular situation. No attorney-client relationship is created by this post or the information contained herein, and this post may constitute attorney advertising. To get specific legal advice, you should seek out the services of an attorney.