All adults should have a comprehensive estate plan in place. While most people think about creating a will, there are other components that must be considered.
Two critical things for people to think about are who will handle their affairs if they become incapacitated and what’s the easiest way to pass assets to loved ones. These two points can be addressed through powers of attorney designations and trusts.
The role of powers of attorney in estate planning
A power of attorney is a legal document that authorizes someone to act on behalf of the creator in various matters. There are different types of POAs, each serving a specific purpose. A financial POA allows the agent to handle financial matters, while a healthcare POA enables decisions related to medical care. These documents are vital in estate planning as they ensure the creator’s wishes will be respected if they can’t make decisions due to illness or incapacity.
Trusts and their function in asset management
Trusts allow an individual to transfer assets to a trust managed by a trustee to benefit specified beneficiaries. They offer several benefits, such as avoiding probate, maintaining privacy and potentially reducing estate taxes. They provide a mechanism for the controlled distribution of assets. They ensure that beneficiaries receive assets in a manner consistent with the creator’s intentions.
When setting up powers of attorney and trusts, selecting trustworthy and competent individuals to serve as agents and trustees is crucial. These individuals will have significant responsibilities and power. They must be able to act with the best interests of their duties in mind. Regularly reviewing and updating these documents is also essential to ensure they continue to reflect the individual’s current wishes and circumstances.
Remember, these are only part of a comprehensive estate plan. All parts of an estate plan should work together to make the wishes of the creator known. Creators who seek legal guidance can better ensure that everything is set up so it can be legally complied with in the event of incapacity or death.