A Guide to the Basics of Estate Planning
Every adult should give consideration to estate planning , regardless of whether their assets are substantial or not. It’s commonly thought that estate planning in Baltimore only involves the creation of a will. In fact, estate planning can encompass many other elements, such as making arrangements for the care of your minor children and specifying your healthcare preferences in the event that you become incapacitated. The minimum three documents everyone should have are a Last Will and Testament, Advance Medical Directive, and Power of Attorney. For legal guidance, you should consult an estate planning attorney.
When you meet with a lawyer to draft your last will and testament, you’ll be asked which beneficiaries you’d like to name. Your beneficiaries are the individuals to whom you bequeath your assets after your death . You could choose to leave all of your assets to one individual or you may wish to divide them between beneficiaries. You can be as specific as you would like. For example, you could bequeath family jewelry to a child or your piano to a sibling. You could also leave proceeds of your assets to charities.
Maximizing the Bequeathment
The assets you leave to your beneficiaries may be subject to federal and state estate and inheritance tax. Estate tax can be significant in some cases. One benefit of hiring an estate planning lawyer is that he or she will have extensive experience in strategies that maximize the amount that your beneficiaries will receive by minimizing taxes.
Designating a Guardian
If you have minor children, your will is the document that will establish guardianship in the event that you pass away before they reach the age of majority. When choosing a guardian for your children, consider factors such as your preferences for your children’s upbringing and which individual is most likely to provide your children with the stability they need. Be sure to ask the individual if he or she is willing to assume guardianship.
Designating a Custodian or Trustee
If you have minor children, your will can leave either a custodian to hold property of your minor children or a Trustee. The Custodian or Trustee does not have to be the Guardian over your child. You can name a different person to hold the property you are leaving for the children. Typical, a Custodian holds the property until the child reaches age 21. Instead of a Trustee, you could elect a Trustee who can hold the property pass the age of 21. The Trustee can also be provided with specific instructions of when and how to distribute property for education, the child’s needs, etc.
Establishing a Living Will, Advance Medical Care Directive and Healthcare Proxy
Other important components of estate planning include establishing a living will and designating a healthcare proxy. Typically this document is called an Advance Care Directive whereby you select a person to act as your healthcare proxy. This Directive not only deals with end of life issues (do you wish to receive life support), but also health care needs immediately. Your agent will be able to communicate with your health care providers as well as insurance companies on your behalf. The Directive can go into effect either immediately or if you become incapacitated, or unable to communicate your wishes. In selecting this person, you want to select someone that you trust and will act in your best interest.
Establishing a Power of Attorney and Attorney-In-Fact
Should you be out of the country, bed ridden, or incapacitated, you will need a third party to act on your behalf related to your property and financial issues. Estate planning includes establishing a Power of Attorney whereby you name a person to act as your agent and attorney-in-fact when you cannot. He/she will be able to handle issues related to your bank account (make deposits and pay your bills), invest or withdraw from retirement or other investment accounts, address cash life insurance policies, file your tax returns, and apply for government benefits. The Power of Attorney can be effective immediately or upon you being unable to handle your affairs. It is also can be limited to last for a short period of time while you are on vacation or involved with a business matter