Documents in a simple estate plan

A simple estate plan generally includes the following documents; a will, health care directive and power of attorney.  But before we get to the good stuff it is important to know that this post, and the entire blog for that matter, is only general information and is not legal advice.  If you have questions or are interested in estate planning please contact an attorney.

Now that we have this out of the way lets get to the heart of the matter!

What is Estate Planning? Estate planning is the planning for care of one’s family and the orderly transfer of one’s property at death.  You get to decide how your assets are handled at death.    Estate planning can include tax planning for larger estates.   

 Wills: 

A will is a document that controls your probate assets at death.  Probate assets are those assets that do not pass automatically.  Assets that have beneficiary designations will pass by their own terms and are therefore not probate assets.   Probate is the legal proceeding through which assets will be transferred in accordance with a will or intestacy laws.  It is important to understand that simply having a will does not avoid probate; rather it usually makes probate easier and less expensive.   

Benefits of having a will:

• Control where your assets go after death and how they are handled
  • Items with sentimental value can be passed on to those that most appreciate them
  • You can include people in your will that would receive nothing under the intestacy statutes
  • You can exclude people from your will that would have received an equal share under the intestacy statutes
• Choose your personal representative(s)
  • The person(s) that will assemble the decedent’s assets, bills and distribute assets in accordance with the will
• Select guardian(s) for minor children
• Ability to differentiate between beneficiaries that may require more money or care
  • A child with special needs can be given more assets to assist with their needs
• You can create trusts in your will called “testamentary trusts” to set aside assets to care for loved ones
• Streamlines the passing of assets and reduces costs and expenses of probate proceedings

  What happens if I do not have a will when I die?

• The court will decide where your assets will go based on intestacy laws
• Your heirs will split up your assets equally without regard to what you believe is a fair distribution
• The probate process will likely be more expensive and time consuming than one that involves a will
• If your estate exceeds the taxable estate limits under Minnesota Law it may be subject to a much higher tax burden than one with proper tax planning through wills and trusts
• If you have children the court will appoint a guardian, one that may be different than whom you would choose

Health Care Directive: 

What is a health care directive?

• A health care directive is a document that explains the desires and wishes of a person regarding their health care
  • Often the document uses examples to spell out specific health care preferences for common situations
• Appoints a health care agent to make decisions for you in accordance with the document should you become incapacitated

Power of Attorney: 

What is a power of attorney?

• A power of attorney is a document that authorizes a financial agent (known as the attorney-in-fact) to act for the principal
• There are different types of POA’s, including, but not limited to, durable and statutory short form power of attorney
  • A durable power of attorney continues to be in effect in the event of incapacity
  • A statutory short form power of attorney is a standardized POA that allows the person to check the box and fill in the blank to decide what powers they want their attorney-in-fact to have
    • This POA is more likely to be recognized by banks and other institutions as they are usually familiar and comfortable with the statutory short form

 A simple estate plan is a great option for those who do not have a large estate, but each persons situation is different and an attorney should be consulted to determine what is appropriate for you.