Estate planning is about much more than avoiding taxes, pt. 2
Estate taxes were the topic of the first post in this two-part series. Estate tax and wealth transfer planning are very important, but they are not the only considerations one needs to make in estate planning. Proper plans protect individuals in many other ways, even if they do not have a significant amount of wealth.
Protection starts with the possibility of incapacitation. Tools such as a living will, healthcare proxy, power of attorney, long-term care insurance or a revocable trust help in situations in which you are unable to make decisions because of an illness, like dementia, or an accident resulting in brain injuries. Then, there are the many after-death benefits of a proper estate plan.
Listed below are only a few examples of how proper estate planning can help:
- A living will provides direction for important healthcare decisions.
- A healthcare proxy designates someone you trust to have the final say in treatment plans, instead of a hospital or other party.
- A power of attorney ensures that someone is there to pay your bills and protect your finances while you are in the hospital.
- Guardianship designations can help you make sure that someone you trust takes care of your children should you be unable due to incapacity or death. Without one, the court may decide.
- A clear last will and testament provides direction for the distribution of your assets and helps avoid family conflict and will contests. Without one, Pennsylvania intestate laws control.
- Trusts can help provide for a special needs child without affecting their eligibility for public assistance benefits, like Supplemental Security Income or Medicaid.
- Trusts can provide controlled distribution of wealth for minor children or adults by including limitations and restrictions.
The right combination of "tools" is different for every person, and these documents will not be effective unless they are drafted and executed properly. Consulting with an estate planning attorney is the best way to ensure your plan fits your needs and accomplishes your goals.
Source: Insurance News Net, "Back to the Basics of Estate Planning: Reexamining Estate Planning Needs, Regardless of Wealth," Victor Ngai, March 26, 2015