Estate planning is nothing more than developing a process to identify and transfer your property, whether during your lifetime or at your death. Anything that you care about—from an old rocking chair that belonged to your grandmother to a cabin where your family spends its vacations—is important enough to justify estate planning. If you have a minor child, you have estate planning concerns. Who will raise your child if you are unable to do so? Who will manage any assets your child might inherit? If you do not have an estate plan, some states (including Texas) will determine what happens to your estate, and it might not be what you would want. Consider the following estate planning tools.

Last Will and Testament

A Last Will and Testament, or Will, is the cornerstone of all estate plans. A Will is a personal declaration of your intentions about the distribution of your property at death, and everyone should have one. By making a Will, you can decide who will receive or benefit from your property, how much each beneficiary will receive, and when each beneficiary will receive his share. If you die without a Will, your property may be distributed according to state law and without any specific direction from you about who receives your assets and in what proportion.

35% of Americans report having a Will

source: Lawyers.com survey via Forbes

In addition to directing the distribution of your property, your Will appoints a personal representative, called an executor, of your estate. The executor is responsible for overseeing the management and distribution of your estate. Some assets, such as IRAs and life insurance policies that may constitute part of an estate, are paid directly to the designated beneficiary of the asset and are not part of the disposition of property under a Will.

Because a Will is not legally enforceable until your death, it may be changed at any time during your lifetime if you are mentally competent. A Codicil is a separate document that adds to or amends the terms of your Will. A Codicil is best used for minor changes rather than a complete overhaul of a Will. The execution of a Codicil requires the same legal formalities as the execution of a Will.

It makes good sense to review your Will periodically to confirm that the terms of the Will are consistent with your intentions. Everyone’s circumstances change over time. For example, a parent may execute a Will when a child is born and the parent’s intentions for the child’s inheritance may change as the child grows, making it important to review and update the Will.

It’s estimated that over 120,000,000 Americans do not have up-to-date estate plans to protect themselves or their families.

source: estateplanninganswers.org

Trusts

A trust is a common estate planning tool that can be created during lifetime, such a trust being referred to as an inter vivos trust, or under a Will, such a trust being referred to as a testamentary trust. A trust requires the transfer of property to an individual or corporate trustee, who then manages and distributes the property for the beneficiaries according to the terms of the trust. An inter vivos trust can be revocable or irrevocable. With a revocable trust, the grantor has access to the trust property. With an irrevocable trust, the assets of the trust no longer belong to the grantor but are owned by the trust.

21% of Americans have a trust arranged

source: Lawyers.com survey via Forbes

The reasons for creating trusts are varied and may include:

• Ensuring professional management and investment of the trust property.

• Minimizing estate and gift taxes.

• Distributing assets efficiently without the expense and delay of probate.

• Placing conditions on how and when the trust assets should be distributed, and when the trust should terminate.

Directive to Physicians & Medical Power of Attorney

A Directive to Physicians (commonly known as a Living Will) expresses your wishes, based on your own personal beliefs and values, regarding the continuation of artificial life support in the event of certain terminal or irreversible medical conditions. The decision about life support is made by you as a competent adult so that your family is not left to make the decision at a later date.

A Medical Power of Attorney allows you to appoint an agent to make health care decisions for you, including life support decisions, in the event you are physically or mentally unable to make medical decisions for yourself.

HIPAA Release

The Health Insurance Portability and Accountability Act (HIPAA) was enacted to protect the privacy of medical and health information; as a result, the release of medical information is strictly guarded. With a HIPAA release, you may authorize your health care providers to allow one or more designated agents to have access to your medical records and information.

Declaration of Guardianship

You may designate a future guardian for yourself or for your minor children. In the event you become incapacitated, a guardian of your estate manages your assets and a guardian of your person takes legal responsibility for you as an individual. An individual may act as both guardian of the estate and of the person, but it may be advisable to separate the responsibilities in order to establish a system of checks and balances. In a document designating a guardian, you may also specifically disqualify certain persons from serving.

Although there are many options to consider when deciding on how to transfer your property or plan for your future needs, the tools listed here describe some of the key aspects of estate planning. Estate planning is not only valuable for the individual considering the plan, but it also eases the burden of decision-making for those who are left behind.