ESTATE PLANNING BASICS & BENEFITS
You have probably heard of wills and trusts but might be a little fuzzy on what it all means. While most comprehensive estate plans have in common several basic components—which are covered below—our main goals when working with you to craft your customized estate plan are to help you preserve, and pass on, your legacy after you die and provide guidance for managing your affairs if you become incapacitated and unable make decisions for yourself.
We recommend that the following basic documents be included in your estate plan:
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Trust
A trust is legal structure which holds property for your benefit during your life and for the benefit of your beneficiaries after your death. The use of a properly funded trust allows your beneficiaries to avoid the costly and time-consuming process of probate.
There are numerous trusts available to address a myriad of situations, but one of the most common is a Revocable Living Trust or RLT. An RLT allows you to maintain control of your accounts and property as the trustee and the RLT agreement can be changed at any time, up until your incapacitation or death. To read more about RLTs and other trusts, visit our Trust-Based Plans page.
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Last Will & Testament or Pour-Over Will
Put simply, a will expresses your final wishes relative to your assets and the dependents. The will is typically a written document that is signed and witnessed.
If your estate plan is will-based it will, by definition, include a Last Will & Testament, which describes who you want to inherit your property, names a personal representative or executor to administer your estate, and might nominate a guardian to care for your minor children. The use of a will as your primary estate planning strategy will likely require the court process known as probate.
A trust-based plan also includes a will, which in this instance is often called a Pour-Over Will. This document will be used only if an account or piece of property was not transferred either to your trust during your lifetime or to your trust or another beneficiary at your death through a beneficiary designation. A Pour-Over Will directs that all accounts or property subject to probate be transferred to your RLT. Though this requires the probate process, a Pour-Over Will ensures your money and property will end up in the trust, managed and handed out according to the trust's instructions.
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Financial Power of Attorney
A financial power of attorney is a written document giving a trusted person, who is called an attorney-in-fact in Tennessee, authority to handle your finances and property on your behalf. This person will be able to take care of signing checks, open or close bank accounts, sign a deed, etc. You can customize, according to your specific needs, what the attorney-in-fact is allowed to do and when she is authorized to act for you. If you become incapacitated and have not formally chosen someone to make financial decisions on your behalf, your loved ones will have to wait for a judge to appoint someone without input from you.
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Health Care Power of Attorney
This power of attorney, sometimes referred to as a Medical Power of Attorney, is a document that allows you to name the trusted decision-maker (your agent) that you would like to communicate your healthcare wishes or make medical decisions on your behalf if you become incapacitated. Without a formal Health Care Power of Attorney, your loved ones will have to ask a judge to appoint someone to make medical decisions for you, and the person appointed might not be the one you would have chosen. In addition, the court process is public and takes time and money during an already stressful period.
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Living Will
The Living Will, or Advance Health Care Directive, communicates your wishes for health care and end-of-life choices when you are unable to make these decisions for yourself. Carefully considering your desires regarding life-prolonging procedures and clearly communicating them to your chosen medical decision-maker is imperative. In the absence of these instructions, your medical decision-maker will be forced to guess what you want. Not only can this situation be very stressful for your medical decision-maker, it can also be a breeding ground for disagreements among your loved ones if their opinions differ.
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Health Insurance Portability and Accountability Authorization (HIPAA)
Federal and state laws dictate who can receive medical information without the patient's written consent. A Health Insurance Portability and Accountability Authorization is a legal document that gives your doctor or other health care providers the authority to disclose your medical information to the agent(s) selected by you. With a HIPAA Authorization, you grant the named individuals the right to receive information about your medical condition (e.g., to get a status update on your condition or receive your test results). Although these individuals have the right to obtain the information, they do not have the authority to make decisions on your behalf. That power belongs to the decision-maker you have named in your Health Care Power of Attorney. Providing information to your loved ones can help calm the anxieties and uncertainties that often arise during times of emergency. The HIPAA Authorization can also help alleviate any tension between the person you name as the medical decision-maker and the rest of your loved ones.
Guidance From An Estate Planning Attorney
Now that you are familiar with what estate planning is and the benefits it can provide for you and your loved ones, let our skilled team help bring peace and stability through a well thought-out estate plan. Contact us today to learn more about your options.
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