Knowledge of estate planning basics is not just for those with high net worth and the wealthy; planning for the future is everyone's business. The importance of a basic estate plan is that when you die without one (legally known as intestate), the courts will appoint an executor that will distribute your assets and who shall take care of your minor children if you're a single parent. Here are some of the basics you should know.
A will has basically three functions after your death:
- Transfer or distribute your assets according to your wishes
- Appoint a guardian if you have minor children
- Name an executor to supervise the entire process and ensure compliance with your will
When you die even with a will to hand, there is still the probate process that takes three months to two years. The assets you leave behind will be frozen around this time. However, if you have a trust made before your death, the probate process can be avoided. Aside from time, a trust will also save money and effort on your heirs' part, as attorney and court fees can eat your assets' value during the probate process.
Durable Power of Attorney
A durable power of attorney will appoint a person who will act on legal and financial matters on your behalf if you become incapacitated.
Health Care Proxy
This is also known as the health care power of attorney. You will choose the person to make medical decisions on your behalf in cases where you won't be unable to do so.
A living will instructs family members regarding end of life issues. This document supersedes all decisions made by a health care proxy.
You can talk to an attorney or law firm to help you determine which of the ones mentioned above suits you and your heirs regarding estate planning basics.