An estate plan is simply a set of legal documents that instruct your loved ones how to manage your assets when you pass away, and if you have young children, it identifies the persons you want to raise your children. It also authorizes the persons you choose to manage your assets and make health care decisions for you if you become incapacitated. An estate plan can also leverage your assets to reduce or eliminate estate taxes and capital gains taxes, and it can be structured to significantly protect the inheritance you leave your spouse and children from divorce claims and lawsuits.
As you can see, estate planning has to do with death and taxes, and as Ben Franklin said, “in this world nothing can be said to be certain, except death and taxes.” Since everyone will have to deal with death and taxes, everyone needs an estate plan.
The type of estate plan you need will depend on your family, your assets and your goals. At a minimum, you will need a will, which lays out who you want to receive your assets, a durable power of attorney, which names the persons you want to manage your affairs if you become incapacitated and an advance health care directive and HIPAA, which authorize the persons you want to make health care decisions for you if you can’t. If you own a home, you will also want a revocable living trust so your estate won’t have to go through probate.