First of all, almost everyone has an estate, because an estate is merely made up of everything a person owns – cars, real estate, checking accounts, investment accounts, furniture, clothes, etc. So, dear reader, you are pretty much guaranteed to have an estate.
Given that you have an estate, you need to do what is best for it. You need to make plans for the “what ifs” in life. You need estate planning.
The biggest “what if” that people tend to think of is “What if I die?” In Texas a will is usually the best estate planning tool to use for this question. This is because the laws in Texas make probate extremely easy and efficient. There are some situations where a living trust is a better idea, and I’ll cover living trusts in a separate article.
If you have a will, then the named executor will disburse your assets in the instructions given in the will. If you have a living trust, then the named trustee will take care of and disburse the assets using the instructions included in the trust document.
If you don’t have a will or a trust set up to take care of your assets, then the state government uses very specific rules on how to distribute your assets. And I would say that it is very rare that this is how the person who passed away would have wanted it. And not only will the assets likely not go where he or she would have wanted them to go, the process will take a lot more time and cost a whole lot more money to implement.
And there are other “what ifs” that estate planning takes care of. If you have minor children, then what happens to them if you pass away and the other parent is also gone at that time? Who will become their guardian? You can include in your will whom you would like to take care of your children, or you could create a separate document for this. Without appropriately documented instructions like this, the court will decide for you. And much like not having a will or trust, oftentimes the person the court chooses may not be someone you would have chosen.
Then there is the “what if” of “what if I become incapacitated and cannot make decisions for myself?” In other words, what happens if I get really sick, go into a coma, get dementia, etc. to where I cannot make appropriate decisions for myself? There are three primary documents for this scenario.
First, there is the power of attorney, sometimes called a durable power of attorney. This document authorizes someone you trust to act on your behalf in making financial decisions for you. This person is called an agent. Most power of attorneys become effective the day that you sign the document. This means that from day one your agent can pay your bills, cash checks for you, speak to the financial institutions you do business with, etc.
If you have what is called a springing power of attorney, then this agent will only be able to do these things on your behalf after you’ve become incapacitated due to sickness or an accident or whatever else that could render you incapacitated.
Second, there is a medical power of attorney. Like the durable power of attorney, if you become too ill to make medical decisions for yourself, then a designated agent will be able to make those decisions for you. Basically, when you are not able to communicate with your doctor, your designated agent will communicate your desires for you.
And lastly, there is a living will. This document makes sure that your predetermined wishes are granted if you were to become incapacitated and diagnosed with a terminal illness or irreversible condition. It basically comes down to whether you would want the doctors to use all medical treatments possible to keep you alive as long as possible, or if you would want them only use whatever is necessary to keep you as comfortable as possible. This not only grants your wishes, it also takes the heavy burden of that difficult decision off of your loved ones.
That, in a nutshell, is estate planning. There are certainly other documents and aspects to consider, but these documents are the core foundation for any estate plan.