Lawyers have a bad habit of using their own language to make simple things sound complicated. One example is when we use the phrase "Estate Planning". Today, most people think of estates as large pieces of land, usually in England, and usually run by somebody wearing a suit. However, an "estate" is something we all have, and something we should all plan for.
Estates, in the legal world, are the total amounts of the things we leave behind when we pass. Estates include money, bank accounts, houses, cars, stocks, and sometimes even companies. They do NOT include children or spouses. Basically, if it's a thing that you can't take with you when you go, then it's part of your estate.
So how can you plan an estate? By deciding where and how you want your estate to be divided. This can be done through a Will or a Trust. A Will is a simple but important document that lays out who will receive your assets, how much or what they'll receive, and who should be in charge of doing the dividing. Trusts are much more complicated and are typically only recommended for people in special circumstances. These special circumstances can include a child with special needs, a very large estate, a family company, or a complicated family structure. There are many types of Trusts, and I'll address these in an upcoming post.
Wills and Trusts are a good idea because they make it easier on those you leave behind to figure out what you wanted (call an executor). If you have kids or a pet and have ever left a note for the baby-sitter or pet-sitter, then you already know how important it is to put things in writing. Should your executor sell your house, or should it be handed down to your children? Should your money go to your family, charity, or a combination of both? Wills and Trusts answer these important questions and more.
In addition to a Will or Trust, estate planning should also documents describing how you want yourself and your assets to be handled during your lifetime. These documents include a Durable Power of Attorney, a Living Will, and a Healthcare Power of Attorney. Most people take care of their own selves and their own assets, so these documents can seem unnecessary. However, these documents work to protect you if there is ever a time when you cannot make decisions for yourself.
A Durable Power of Attorney lets you give someone else the power to act on your behalf to take care of your things. For example, they could deposit a check for you if you've recently had knee surgery and struggle to get to the bank. A Durable Power of Attorney does NOT take away your ability to take care of your own things. And it does NOT give somebody else the power to override you. In fact, if you think your Power of Attorney isn't following your directions, it is always possible to take their power away.
A Living Will and a Healthcare Power of Attorney lay out your wishes for your healthcare. Simply put, a Living Will says what you want to have happen, and a Healthcare Power of Attorney says who should make it happen. Living Wills are documents that are often given to hospitals and doctors, and they describe your end-of-life decisions. These decisions include whether or not you would like to be on life support in certain situations. Living Wills are only meant to be used if you are not able to make that decision yourself. Healthcare Powers of Attorney, which also are given to hospitals and doctors, lay out who you want to be in charge of your health if you aren't able to make those decisions. Healthcare Powers of Attorney, just like Durable Powers of Attorney, do NOT take away your power to make your own decisions. And, again like Durable Powers of Attorney, you can take power away from your Healthcare Power of Attorney if you think they're not following your directions.
All of these documents (a Will or Trust, Durable Power of Attorney, Living Will, and Healthcare Power of Attorney) put together create an Estate Plan. The term "Estate Plan" can be confusing because only the Will or Trust deal with your actual estate. A better term might be "End-of-Life Plan". But, after all, lawyers aren't known for using the best words to describe things.