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By Lila Havens, HealthAtoZ Writer
An estate sounds like something only the rich and famous have. But whether you know it or not, you have an estate. An estate is the total of things you own (which are called assets). This may be a lot or a little, but by law it will be dealt with upon your death.
If you die without a will, a court will make the decisions about who gets what. This can be a slow and costly process, and it might not turn out the way you'd prefer.
Making an estate plan lets you decide how your assets will be divided. It also lets you state how you want to be cared for and who you want to make decisions for you if you can't speak for yourself. An estate plan can give you peace of mind, knowing your wishes will be carried out after you're gone.
What are the parts of an estate plan?
A good estate plan often includes:
- A will
- A power of attorney
- A living will
- A medical power of attorney
- A trust
A will is the centerpiece of an estate plan. It lets you state who will inherit your assets. Also, it lets you name someone you trust (called an executor) to see that your wishes are carried out. If you have minor children, the will can state who you want to take care of them.
It's best to have your will prepared by a lawyer. To be valid, a will must follow the laws of your state. It may require the use of certain language or a certain number of witnesses. A self-prepared will might not hold up in court.
A power of attorney lets you choose someone to act on your behalf. Power of attorney can be temporary or permanent (durable). It can be limited to certain situations or apply to all your legal decisions. For example, you might give power of attorney to an adult child if you're in the hospital. You can cancel a power of attorney at any time for any reason.
A living will lets you state what treatments you would want if you are very ill and not able to speak. For example, you can state whether you would want CPR if your heart stops or a feeding tube if you're in a coma.
A medical power of attorney (or health care proxy) lets you choose someone you trust to make your medical decisions if you can't do this yourself. Choose someone who knows you well, understands your wishes and is strong enough to act on them even if others disagree.
A trust is a part of many estate plans. A trust may be especially important if you want to leave assets to minor children or grandchildren. It can manage your assets until you feel children are old enough to inherit.
How do I get started?
The first step is to make a list of all your assets. This should include your home, retirement accounts, investments, jewelry, life insurance policies, vehicles and other personal property. Put a value next to each item. Total this up and subtract your debts. This will give you an idea of your net worth. You may be surprised how much it is.
Once you have this list, see a financial planner and a lawyer to start making an estate plan that matches your wishes.
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