Estate planning and drafting a will are two processes that go often hand in hand, but many people don’t know the difference between the two or think they’re interchangeable—which they’re definitely not.
An estate plan is a comprehensive plan that includes documents that are effective during your lifetime as well as other documents that aren’t in effect until your death. Together these documents contemplate who has the power to make healthcare and financial decisions on your behalf during your life, and who receives your assets at death.
Having a lawyer draft your will is an important piece of the estate planning process, but there are several other important documents. A will details where you want your assets to go at your death, and who you would like to serve as guardian of your minor children. A will also names an executor who is in charge of distributing your assets to the right people or charities.
The other documents that comprise an estate plan could include:
Power of Attorney:
A Power of Attorney is the person you designate to step in and manage your affairs, should you become ill or incapacitated. The person you designate, known as your agent, has the power to make financial decisions on your behalf. A Power of Attorney can be general, giving the designated agent the authority to conduct any type of business, or specific, limiting your agents power to transactions expressly outlined.
Advance Directives and Representation Agreements (Health Care):
An Advance Directive is a written document stating how you want medical decisions to be made if you lose the ability to make them for yourself, including and especially end-of-life decisions.
A representation agreement is a legal planning document that allows you to choose the person or persons who will make important decisions for you, or assist you in making decisions, if you become incapable of making decisions on your own. The person you so choose is called your “representative.”
Trusts:
A trust is a legal arrangement through which a trustee holds legal title to property on behalf of a beneficiary or beneficiaries. The person setting up a trust can dictate how and when beneficiaries receive the assets in the trust.