By Elizabeth Kearns
Do you want to have a say in who will receive your property after your death? Do you want to decide who will care for your minor children if you and your spouse die? Do you want someone you trust to be able to make financial and health care decisions for you if you become incapacitated? If you answered yes to any of these questions, you need an estate plan. Without proper planning, important decisions about your assets, your family, and your wellbeing will be made by a court or state law. By creating a basic estate plan – typically a last will and testament, and powers of attorney for property management and for health care – you can make these decisions yourself and protect your family from unintended results and unnecessary expense.
A primary component of an estate plan is the last will and testament. The main functions of a will are to name a guardian for your minor children, an executor of your estate, and to specify who will receive your assets. The guardian will care for your children if both you and your spouse die. The executor is responsible for collecting your assets, paying your debts, and distributing your assets to your beneficiaries. If you die intestate (without a will), a court will appoint people to these roles, and they may not be the people you would have selected yourself.
In the absence of a will, state law dictates who will receive your estate. In many states and the District of Columbia, this means your estate will be divided between your spouse and children, or if you don’t have children, between your spouse and your parents. If you are unmarried, your property will be distributed to your closest relatives. By creating a will, you determine which beneficiaries receive which assets.
A will also allows you to decide how and when your beneficiaries will receive your assets. In most states and the District of Columbia, if a minor child receives property from an estate, retirement account, or life insurance policy, a court must appoint and supervise a guardian who will manage the assets until the child turns 18. To avoid this unnecessary burden and expense, and to prevent your child from receiving a lump sum inheritance at age 18, you can set up a trust in your will to receive and hold your child’s share of your estate. The trust allows you to decide who will manage the funds, how they will be used, and at what age the child will have full access to them.
The other essential component of the estate plan is the power of attorney, which allows you to plan for your incapacity. In a general power of attorney, you name an agent to manage your property and financial affairs if you become incapacitated. Absent a power of attorney, a court would need to appoint a guardian of your property who could access your accounts to pay your bills and use your funds for your care. A guardianship proceeding is a time-consuming and expensive legal process that is easily avoided by a basic power of attorney. The power of attorney for health care appoints an agent to make health care decisions for you if you cannot act for yourself. It often includes a “living will,” which is an expression of the type of care you wish to receive in an end-of-life situation. It’s important to get in contact with a company like legalzoom to arrange power of attorney.
Regardless of your situation, creating a simple estate plan can greatly reduce unnecessary costs and complications and avoided unintended results both during your incapacity and after your death. Your loved ones will thank you.
Elizabeth Kearns is an estates and trusts attorney at Furey Doolan & Abell, LLP in Bethesda, Maryland. She is licensed to practice in D.C., Maryland, and Virginia. She lives in Northwest D.C. with her husband and 7 month old son.