Even though the only things in life that are certain are death and taxes, no one likes to think about their own mortality. In fact, we despise the idea of considering our own demise so much that we will do almost anything to avoid thinking about it. It makes us uncomfortable to have conversations with our family members such as our spouses and children about our wishes for what will become of our worldly belongings after our death. However, making sure that a comprehensive plan is created that addresses what will become of you and your assets when you can no longer make that decision for yourself should be a vital part of your life. Known as Estate Planning, this process will help ensure that all of the various – and sometimes daunting – documents that will be needed towards the end of your life are prepared, meet all the necessary legal requirements, and are up to date and comprehensive.
The most basic types of Estate Planning include the guided preparation of a will, a pre-appointed person to act as your power of attorney regarding general matters of your life, a specific pre-appointed person to act as your power of attorney in regards to your health care, and a living will. These four things are the most basic items that every person should start with when they sit down with their chosen estate planning lawyers. There are many other services that a lawyer that specializes in estate planning can provide as well, and these services will vary from lawyer to lawyer.
(The first four items have already been covered and are the basic minimum that every adult should consider and prepare when it comes to Estate Planning.)
•Durable Powers of Attorney
•Health Care Powers of Attorney
(The following items are optional and the need for these particular documents will vary from person to person based on their specific needs.)
•Family Limited Partnerships (LLC’s and LLLP’s) – creates a partnership between you and your family members and can reduce that amount of taxes that some members will pay lower taxes on your assets.
Revocable Trusts and Living Trusts – Trusts that are created during your lifetime that act similar to a will, except that they can go into effect while you are still alive in the unfortunate situation where you are mentally or physically ill and incapacitated. It allows you to keep control of your assets while you are alive as well as after your death, even if you are incapacitated.
•Qualified Domestic Trusts
•Qualified Personal Residence Trusts
•Grantor Retained Annuity Trusts
•Irrevocable Life Insurance Trusts (ILIT’s)
•Charitable Trusts – assets that are allocated to charitable donations after your death can reduce the tax burden on your family, as these types of donations are tax deductible without any kind of limit. These donations can therefore reduce the taxable estate.
•Supplemental/Special Needs Trusts
As you can see, there are many different ways for you to separate your assets when you die, and it is very important to have these documents prepared ahead of time.