Distribution of assets after death is often understood to be the sole purpose of an estate plan. However, a comprehensive estate plan entails much more than a will to distribute assets after death. An estate plan includes preparing for crises that may occur during your lifetime, more specifically, crises that may lead to incapacity. Because each person’s needs vary, so will their estate plan. A basic estate plan typically includes a power of attorney, medical directive, and a will. A comprehensive estate plan may consist of the following:
POWER OF ATTORNEY
A power of attorney grants an agent the legal authority to make decisions on your behalf. Typically, a power of attorney is used to appoint an agent to manage your affairs should you become incapacitated. Unless stated otherwise, a power of attorney becomes effective immediately. The agent’s authority terminates immediately upon the grantor’s death.
MEDICAL DIRECTIVE
A medical directive grants an agent the authority to make healthcare decisions on your behalf in the event that you are unable to do so. A medical directive provides detailed instructions regarding the type of care you do or do not want under various conditions.
HIPAA RELEASE FORM
Understanding the patient’s medical history is essential for the healthcare agent to make informed healthcare decisions. The Health Insurance Portability and Accountability Act of 1996 (HIPAA) restricts the release of a patient’s medical records without prior authorization. A signed HIPAA Release Form is required to authorize the release of a patient’s medical information.
WILL
A will memorializes the testator’s wishes regarding the administration of the estate upon death. In addition to appointing an executor to facilitate the administration of the estate, a well drafted will defines how, to whom, and when assets should be distributed and appoints a guardian for minor children and dependent adults. A will is effective upon the death of the testator and can be revoked any time prior to the testators’ death or incapacity. A will must go through probate to be enforced.
TRUST
A trust allows the settlor or grantor to transfer legal ownership of assets into a legal entity and establish rules regarding the use and distribution of the assets. There are various types of trusts to include but not limited to, testamentary, revocable, irrevocable and special needs. Generally, trusts are established as a tool for asset management, asset protection, to mitigate expenses, and in some cases to minimize taxes. Most trusts avoid probate.
PERSONAL CARE PLAN
A personal care plan provides caregivers with detailed instructions about your daily routine, likes, and dislikes. A personal care plan can be especially helpful if the caregiver is not a family member and unfamiliar with you. A personal care plan can be as detailed as you’d like. It may contain instructions about your favorite meals, movies, hobbies and anything that you may want your caregiver to know that may assist in your daily routine.
LIFE INSURANCE
Life insurance provides financial protection for surviving dependents after the death of the insured. Life insurance may be used to cover burial expenses, replace the income of the decedent or as a means to transfer wealth.
LONG TERM CARE INSURANCE
Long term care insurance covers the cost of care for those with chronic illnesses, disabilities or other conditions that require daily care for an extended period of time. Depending on the terms of the policy, long term care insurance may cover the cost of in-home care, assisted living and/or nursing home care.
DISABILITY INSURANCE
Disability insurance pays a percentage of the insured’s gross income on a tax free basis if he becomes disabled an unable to work. Coverage varies depending on the terms of the policy. Some policies pay if you’re unable to work fulltime in your current profession while others will pay a prorated amount if you’re able to secure part time employment in any profession.
