Make Reviewing Your Estate Plan Your New Year's Resolution
One resolution you should keep this year is to review your estate planning documents. Many people do not have any estate planning documents, but even if you have documents you should take this year to review them and make sure they are up to date. Certain things in life change like marriage, children coming of age, and family members passing away. These changes may impact your estate plan and you will want to make sure your documents still reflect your wishes. There are five basic estate planning documents you should consider or make sure are up to date.
1. Revocable Trust.
A trust is a vehicle to manage property and assets. Once property is “placed into” the trust, the appointed trustee manages the property. Most revocable trusts will name you as the trustee and lifetime beneficiary. You continue to manage your assets and income as you did prior to the trust.
A revocable trust provides two important benefits, probate avoidance and incapacity planning. When you pass away with a revocable trust, your beneficiaries do not need to petition the court to administer your estate, reducing time and costs. The simplified administration alone is worth the cost of establishing a trust. The second benefit to a trust is incapacity planning. If during your lifetime you become unable to make your own decisions, albeit due to dementia or age, your successor trustee can step in your shoes. This avoids a costly conservatorship proceeding.
It is especially important to review your existing trust if it was created in the 1990's. At this time, the estate tax was much lower than it is today so most trusts were created to divide into sub-trusts upon the passing of the first spouse. Because the estate tax threshold is so high now, creating separate trusts might be unnecessary and overly burdensome.
2. Pour Over Will
A pour-over will is an additional estate planning tool. The pour-over will appoints an executor to take care of your final wishes and the wrapping up of your estate. The will covers any assets not included in your trust and names your trust as the beneficiary of your probate estate. It is an extra layer of protection for your estate plan. If you have minor children, you can name a guardian in your will.
3. Advanced Healthcare Directive
An advanced healthcare directive appoints an individual to make decisions for you. You can either appoint the individual to act immediately or upon your incapacity. This document will also express your wishes regarding being kept alive by machines and organ donation.
4. Power of Attorney
A power of attorney appoints an agent to act for you regarding financial matters. A power of attorney allows an individual to step into your shoes should you become unable to act. A power of attorney can be quite general or executed for a specific purpose, such as selling a piece of real property.
5. HIPAA Release
Under the Health Insurance Portability and Accountability Act (HIPAA), only authorized individuals can access your medical information and discuss your situation with healthcare professionals. By executing a HIPAA release, appointed individuals will be able to freely discuss your health and treatment. This release does not give them any power to make medical decisions.