Estate planning is a bit of a misnomer. After all, the word “estate” brings to mind vacation homes and flush investment accounts when, in truth, most estates rarely include such luxury and plans protect not only wealth but physical well-being, too. This is a far-reaching problem as it leads many people, young and old, to delay building an estate plan until old age—if they’re lucky enough to get there.
A chilling 68% of US adults lack an estate plan. As the Covid-19 ravages the country, this is deeply worrying. After all, those without a living will or healthcare proxy will have no way of communicating their care wishes should they become incapacitated—as often happens when placed on a ventilator. Likewise, folks without a revocable trust are liable to see their assets disappear into the hand of creditors should the unthinkable happen and they lose their life just as a beneficiary faces bankruptcy.
A few months ago, such situations seemed unlikely in the extreme; these days, they are a real possibility.
The Five Estate Planning Documents All Adults Need
1. Durable Power of Attorney
Should you become unable to manage even simple financial affairs such as online bill pays or cash withdrawals, you’ll need a durable power of attorney in place. This document allows you to appoint a trusted loved one to make financial decisions on your behalf.
2. A Living Will and Health Care Proxy
The latter is similar to the above and allows you to appoint someone you trust to make healthcare decisions on your behalf in the event you become incapacitated. The former is usually reserved for terminal or serious illnesses (such as Covid-19) and permits you to outline your healthcare wishes should you lose the ability to communicate them, yourself. Such things as resuscitation, ventilator use, and artificial nutrition are often covered. Also, a living will ensures that belief-based care wishes are respected.
3. A Will
However insignificant your worldly possessions may seem at this moment, it is important to remember that a will also ensures that sentimental items and heirlooms are properly distributed to your loved ones. Besides, a will allows you to appoint a guardian for minor children. Naturally, no one wants to contemplate the possibility of dying but it would be irresponsible to ignore the subject, especially in this present moment.
4. A Revocable Living Trust
If you want to ensure your assets are protected from creditors that may come after your beneficiaries or you wish to save your loved ones the hassle and expense of navigating probate court, you need a revocable trust. This document helps you manage your assets while you are alive, permitting you to place restrictions on how and when they will be distributed to beneficiaries. A revocable trust can be dissolved or amended at any time; accordingly, there is little reason to stall on implementing one now.
5. An Asset Protection Trust
As the name implies, an asset protection trust protects your personal assets. It differs from a revocable trust in that once created, the assets placed in the trust cannot be removed and the trust’s terms cannot be changed (except when such an action is approved by the trustee). The advantage here is that even if creditors can file a successful lawsuit against you, they are unlikely to gain access to your trust’s contents and chances are the assets contained therein will not be considered yours.
An asset protection trust does not protect your beneficiaries from probate, however, which is why both types of trusts are needed.
Each individual’s estate planning needs are as different as each individual’s estate. An experienced attorney is the best resource for learning how best to organize yours. As an essential service, law offices are open and available to help and many offer remote or curbside service. Don’t hesitate to reach out and book a consultation. After all, now, more than ever, nobody knows what tomorrow may hold!