Even if you have yet to take the time to create an estate plan, you have likely heard the term. You may also have heard how important it is to create a comprehensive estate plan. Like many things in life though, understanding exactly what an estate plan can accomplish may be necessary before you finally take the steps necessary to create one for yourself.
To begin with, not all estate plans are created equal. In fact, your estate plan should be as individual as you are. As such, your estate plan may include components that someone else’s does not and vice versa. Having said that, the primary purpose of any estate plan is to determine what will happen to your estate assets when you die.
Therefore, your Last Will and Testament will likely be the foundation of your estate plan. For some people, executing a Will is the extent of their estate plan; however, for most people an estate plan will include a wide variety of other documents and strategies as well.
For example, some people incorporate special needs planning into an estate plan if they have a special needs child, grandchild, or loved one whom they wish to protect and provide for financially. Others may be concerned about long-term care planning or Medicaid planning. Along the same lines, asset planning may be a focal point of an estate plan. Asset planning may be important to protect your own assets in the event you need to qualify for Medicaid or you may wish to protect assets that you pass on to loved ones from creditors or from the beneficiaries’ own mismanagement. All of these goals can be accomplished through the creation of a comprehensive estate plan.
Another common inclusion to an estate plan is an incapacity plan. Though most of us think of incapacity in terms of old age dementia, the reality is that a tragic accident or illness could cause incapacity at any time. What happens to your assets and your finances if you suddenly become incapacitated? Who will make decisions regarding your medical care and treatment? Who will have the authority to decide where you live and who cares for you? An incapacity plan can answer all of these questions.
In the absence of an estate plan, state intestate succession laws will determine what happens to your assets upon your death. Without an incapacity plan, a court will decide who makes decisions on your behalf and who controls your finances and assets if you are unable to do so yourself.
Whether you create a simple estate plan or a complex, multi-faceted estate plan, the important thing is that you take the time to create one that accomplishes your unique goals and that prevents the state and the courts from making decisions for you.