What Is in a Typical Estate Plan?

The words “estate planning” might conjure images of grand manors, vast wealth, or complex legal documents. But when you strip away the misconceptions, you’ll find that estate planning is about love, responsibility, and foresight. It’s a proactive approach to secure your family’s future, ensuring that what you’ve built in your lifetime continues to benefit those you care for. That said, how do you know what to include in your estate plan?

The key pieces of most estate plans include:

Your Will

Your will, often called your “last will and testament,” is a pivotal legal document that says what you want to have happen to your estate after you die. Most wills also include provisions stating which beneficiaries will receive your assets. Beyond simple asset distribution, a will also enables you to appoint guardians for minor children and designate an executor to fulfill the provisions of your estate plan.

The significance of a will in an estate plan is unparalleled. Without it, state laws dictate which beneficiaries receive your assets, possibly leading to undesired outcomes and potential family conflicts. By including a will with your estate plan, you can provide clarity and peace for yourself and your loved ones.

Trusts

A trust is a legal arrangement where one party, the trustee, manages and holds assets on behalf of another party, the beneficiary. When you place assets in a trust, you lose direct control over those assets, but doing so allows your heirs to potentially avoid estate taxes and bypass the probate process. Trusts can function both during an individual’s lifetime and after their passing.

The beauty of trusts lies in their versatility. They can be tailored to specific situations, such as providing for a special needs family member or ensuring educational funds for a grandchild, or they can serve a broader function. As part of an estate plan, trusts play a pivotal role in minimizing estate taxes, shielding assets from potential creditors, and bypassing the probate process.

Power of Attorney

A power of attorney (POA) is a legal document that grants someone the authority to act on your behalf in legal issues or other matters. This delegation can relate to financial decisions, healthcare choices, or other specific tasks, depending on the type of POA. Common types include:

General Power of Attorney: Provides broad powers over financial and personal matters.
Limited or Special Power of Attorney: Grants authority for specific tasks, such as selling a property.
Durable Power of Attorney: Remains in effect even if the principal becomes incapacitated.
Medical or Healthcare Power of Attorney: Allows the agent to make medical decisions on the principal’s behalf.

In the realm of estate planning, a POA is indispensable. Life is unpredictable, and there may come a time when you cannot make decisions for yourself due to illness or incapacity. A power of attorney ensures that someone you trust can step in and make decisions that align with your best interests and previously expressed desires.

Advance Health Care Directive

An Advance Health Care Directive, sometimes called a living will, is a legal tool that outlines your

medical treatment preferences in scenarios where you cannot communicate your desires. This is especially important for situations where your brain cannot function properly due to injury or illness.

Beyond specifying treatment wishes, an Advance Health Care Directive also allows you to appoint a trusted health care proxy to make decisions on your behalf during such times. Integrating this directive into an estate plan offers peace of mind; it ensures that someone can make medical decisions for you that align with your values, removing guesswork for loved ones during emotionally charged moments.

While these documents are the core of any thorough estate plan, your plan can go well beyond these parameters. If you have questions about estate planning or wish to create a plan for your future, the team at Roop Xanttopoulos Babounakis & Klam PLLC can help. Call (703) 442-0040 today or complete our contact form for a consultation.