As readers of this blog know, we have spoken about essential estate planning documents before. Most recently, we did a quick primer last month. However, in this post, we will dive deeper into those essential estate planning documents.
The backbone: will
A will is the backbone of an estate plan. It names which beneficiaries receive something and what they receive, and it appoints the person who will be in charge of effectuating these wishes, the executor. For parents, the will can also name a guardian for their children.
A will can be modified up until the drafter passes, and it does not affect anything until that person dies.
Health care power of attorney
Since a will is only in effect on death, if the drafter is disabled or incapacitated, the will does not help the drafter or their beneficiaries. This is why additional documents are needed, like a health care power of attorney. This document designates a person that will make the drafter’s health care decisions, should they become disabled or incapacitated.
Property/financial power of attorney
Similar to the health care power of attorney, a property or financial power of attorney empowers another to make financial decisions for the drafter, should the drafter become disabled or incapacitated. This includes operating a business, paying bills, etc.
Living trust agreement
A living trust agreement affects current property and does not simply “activate” at death or incapacity, like the other documents. Instead, this agreement allows the drafter to move property and assets (i.e., real estate, bank accounts, insurance, etc.) into a trust. As this is an active document though, the drafter can still utilize those assets, but, upon death, it can help heirs avoid taxes. It also names a trustee that can act for the drafter, should they become incapacitated or die, maintains privacy, as it is not a public record, and avoids probate proceedings.
Of course, these documents are not an exhaustive list for Fayetteville, North Carolina, residents. And, every person’s estate plan will look different.