Estate planning explained often as the process of preparing to transfer your property to your loved ones and others when you pass.
This misses a whole lot of what estate planning is all about.
Estate planning also includes preparing for incapacity and dementia before an accident, medical incident, illness, or dementia strikes. These things often strike without warning or creep up on us and leave us incapacitated.
When we can make our own decisions because of incapacity, nobody else can make them unless you have planned, or your family goes to court. It’s easier to plan now than to force your family into court.
Estate planning explained like I think it should be…
Estate planning is the process of preparing for incapacity and preparing for the distribution of your final estate.
First is preparing for incapacity. To do this, you need to create powers of attorney.
The first power of attorney you want is a Durable Power of Attorney. This names somebody to make legal, personal, and financial decisions when you can’t. Without it, your family is forced to court.
The second power of attorney you need is a Healthcare Power of Attorney. This power of attorney names the person or people you want to make healthcare decisions for you when you can’t.
You also need a HIPAA waiver. HIPAA is a federal law that protects your healthcare information. Without a HIPAA waiver (protected healthcare information waiver) in place, even your family can’t get information from healthcare workers.
The final thing you want during your lifetime is a Living Will. This is not to be confused with a Last Will and Testament. A Living Will is an advance healthcare directive. This document tells doctors that you don’t want to be kept alive artificially if everything has been done.
Then there is preparing for passing your estate. This is done either with a beneficiary plan or a trust plan.
A beneficiary plan is based on using beneficiary designations to pass your estate outside of probate.
A trust based plan uses a trust to pass your estate outside of probate.
Either way, the goal is to pass as much of your estate outside of probate as possible.