You probably have a reasonably clear understanding of the overall goals of an estate plan. You may also have a vague idea of what a plan includes; however, until you sit down to work on your plan, the essential components of an estate plan remain a mystery. Not surprisingly, this leads to several questions. What does each of the estate planning tools accomplish? Which tools and strategies are best suited for your plan? What are the most common components of an estate plan? An Albuquerque estate planning lawyer at Morris Hall PLLC explains common estate planning components. Let us give you Estate Plan Must-Haves.
Last Will and Testament
For most people, the foundation of their initial estate plan is a Last Will and Testament. Executing a Will ensures that you will not leave behind an intestate estate. Dying intestate means the state decides what happens to your estate assets using the state intestate succession laws. Instead, your Will allows you to make specific and general gifts to loved ones. In addition, your Will lets you appoint someone as the Executor of your estate. The Executor is responsible for overseeing the administration of your estate. Finally, your Will offers you the only opportunity you have to officially nominate a Guardian for your minor child should one ever be needed.
After a Will, a trust is one of the most common additions to a comprehensive estate plan. For many people, a trust is one of the Estate Plan Must-Haves. A trust is a relationship where one party holds property for another party’s benefit. The initial owner creates the trust, also called a “Settlor,” “Trustor,” or “Grantor,” who transfers property to a Trustee. The Trustee holds that property for the trust’s beneficiaries. Trusts are either testamentary or living trusts. A testamentary trust does not activate until after the Settlor’s death, whereas a living trust takes effect as soon as all the trust agreement is in place and funded. Trusts are either revocable or irrevocable. A trust can help achieve a wide variety of estate planning goals and can even serve as the foundation of your estate plan if probate avoidance is desirable.
Throughout your life, you will make many decisions regarding your health care. However, there may come a time when you cannot make those decisions because of your incapacity. One type of advance directive allows you to appoint someone as your Agent to make decisions for you when you cannot make them yourself. Another type lets you make some of those decisions relating to end-of-life care ahead of time so that your wishes are clear when the time comes to make difficult choices.
Power of Attorney
A power of attorney allows you to appoint someone as your Agent to act on your behalf in legal transactions. For almost everyone, this is an Estate Plan Must-Have. There are two types of power of attorney, general and limited. A general power of attorney (POA) gives your Agent almost unfettered authority to act on your behalf, meaning your Agent can engage in financial transactions on your behalf, enter into contracts in your name, and sell your assets. On the other hand, a limited POA only gives your Agent the specific authority indicated in the POA agreement. If you make any POA durable, it means that your Agent’s authority will survive your incapacity.
Letter of Instruction
A Letter of Instruction is precisely what it sounds like. A Letter of Instruction provides you with the opportunity to cover anything not covered elsewhere in your plan, as the lawyers at Morris Hall, PLLC, can explain. Some people use it to explain decisions made in their estate plan, while others use it to provide instructions that may be helpful during the estate’s probate. For example, if you did not divide your estate equally amongst your children, you might want to explain why you didn’t in the hope of preventing litigation and hurt feelings. You might also need to tell loved ones where important documents can be located or even something as seemingly mundane as how to winterize a vacation home.
We hope you appreciated this short article about 5 Estate Plan Must-Haves. Feel free to contact us with your questions.