Drafting four important documents and keeping them current is an essential part of estate planning that protects individual, allow them to take care of themselves when they are alive and provides protection for their heirs. Age or net worth are not barriers to having these documents.
The first document is a will. It dictates how assets are distributed to families and other beneficiaries following death. A personal representative is appointed to account for assets, debts, taxes and the distribution of remaining assets.
This document is the only way to designate a guardian for children under 18. The creation of a trust is also recommended to manage assets until they are no longer minors. Because a will does not take effect until death, it cannot govern management of assets if the person becomes incapacitated.
A durable power of attorney is drafted to deal with this. It allows the naming of another trusted person, known as an agent, to manage financial and business affairs when the person is alive. The agent is usually authorized to act in the person’s best interest with management of these affairs, keeping accurate records, keeping property separated and avoiding conflicts of interest. These powers can take effect immediately or upon a specific event.
A health care power of attorney grants powers to an agent for making medical and health care decisions when the person is incapacitated. It helps avoid court intervention and allows quicker intervention of a trusted person to make important decisions.
A living will contains wishes for life-prolonging medical care if the person is incapacitated. It is important guidance on end-of-life care.
Creation of another document, a revocable living trust depends on the person’s situation. The person creating the trust can become the trustee, keep access to its principal and receive its income. Upon death, the trust becomes irrevocable. The designated trustee will follow the instructions contained in the trust to manage its assets and liabilities and to distribute its assets.
An advantage is that a successor trustee can manage assets if the trustee becomes incapacitated. Its assets may not have to go through probate court.
These documents should be constantly reviewed and updated based upon events such as moving, deaths, births, divorce, inheritance or marriage. An attorney can help draft these documents that comply with Michigan law and meet the person’s needs.
Source: Ophthalmology Times, “Basic estate planning protects individual and legacy,” By John J. Grande, CFP; Traudy F. Grande, CFP; John S Grande, CFP, Nov. 1, 2017