Creating an initial estate plan can be a daunting task. Most people understand the overall goals of an estate plan, and may have a vague idea of what needs to be included in a plan; however, until you actually sit down to work on your plan most of the components of an estate plan remain a mystery. Not surprisingly, this leads to a number of questions. What does each of the estate planning tools accomplish? Which tools and strategies should be included in a plan? What are the most common components of an estate plan? The estate planning attorneys at Nash, Nash, Bean & Ford, LLP offer some guidance by explaining the top five most frequently included estate planning components.
Last Will and Testament
You will probably not be surprised to learn that most people use a Last Will and Testament as the foundation of their initial estate plan. Executing a Will ensures that you will not leave behind an intestate estate. Dying intestate means the state decides what happens to your estate assets using the state intestate succession laws. Instead, your Will allows you to make specific and/or general gifts to loved ones. In addition, your Will lets you appoint someone as the Executor of your estate. The Executor is responsible for overseeing the administration of your estate. Finally, your Will offers you the only opportunity you have to officially nominate a Guardian for your minor child should one ever be needed.
Although once used almost exclusively by wealthy families to protect and pass down the family wealth, trusts are now commonly found in the average estate plan. A trust is a relationship where property is held by one party for the benefit of another party. A trust is created by the owner, also called a “Settlor”, “Trustor” or “Grantor” who transfers property to a Trustee. The Trustee holds that property for the trust’s beneficiaries. Trusts are broadly divided into two categories, testamentary and living trusts. A testamentary trust does not activate until after the death of the Settlor whereas a living trust takes effect as soon as all the trust agreement is in place and the trust is funded. A living trust can be further divided into revocable and irrevocable living trusts. A trust can help achieve a wide variety of estate planning goals and can even serve as the foundation of you estate plan if probate avoidance is desirable.
Throughout the course of your lifetime, you will make many decisions regarding your own health care. There may come a time, however, when you cannot make those decisions because of your own incapacity. An advance directive helps you plan for that possibility. The State of Illinois recognizes four types of advance directives, including:
- Health Care Power of Attorney – lets you choose someone to make health care decisions for you in the future, if you are no longer able to make these decisions for yourself.
- Living Will – tells your health care professional whether you want death-delaying procedures used if you have a terminal condition and are unable to state your wishes.
- Do-Not-Resuscitate/Practitioner Orders For Life-Sustaining Treatment (DNR/POLST Order) — says that cardiopulmonary resuscitation (CPR) cannot be used if your heart and/or breathing stops; it can also be used to record your desires for life-sustaining treatment.
Power of Attorney
A power of attorney allows you to appoint someone as your Agent to act on your behalf in legal transactions. There are two types of power of attorney, general and limited. A general power of attorney (POA) gives your Agent almost unfettered authority to act on your behalf, meaning your Agent can engage in financial transactions on your behalf, enter into contracts in your name, and sell your assets. A limited POA, on the other hand, only gives your Agent the specific authority indicated in the POA agreement. If you make any POA durable it means that your Agent’s authority will survive your incapacity.
Letter of Instruction
Think of this as your estate planning “catch all.” As the name implies, a Letter of Instruction lets you leave instructions and provides you with the opportunity to cover anything not covered elsewhere in your plan. Some people use it to explain decisions made in their estate plan while others use it to provide instructions that may be helpful during the probate of the estate. For example, if you did not divide your estate equally amongst your children, you might want to explain why you didn’t in the hope of preventing litigation and hurt feelings. You might also need to tell loved ones where important documents can be located or even something as seemingly mundane as how to winterize a vacation home.
Contact Estate Planning Attorneys
For additional information, please join us for an upcoming FREE seminar. If you have questions or concerns regarding estate planning, contact the experienced estate planning attorneys at Nash, Nash, Bean & Ford, LLP by calling 309-944-2188 to schedule your appointment today.