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5 Key Parts of an Estate Plan

Posted by Daniel J. Eccher, Esq. | Jun 11, 2024

An average of six out of every ten American adults lack an estate plan. Like a sandcastle washed away, without a plan, the lifetime legacy you've built could vanish. When your loved ones grieve, as medical bills mount and deeds gather dust, your final wishes can remain a mystery.

Beyond the foundation of a will, an estate plan encompasses all matters of life and death. A well-crafted estate plan can help avoid probate, minimize taxes, protect your assets, and name your representatives. 

Here's how each part of an estate plan charts your final course.

1. Health-care Directives: An advance directive or living will states your medical treatment preferences and who will legally act for you when you're unable. It includes HIPAA release authorizations to let providers share medical information with your agent.

2. Power of Attorney: A financial power of attorney (POA) legally names someone to represent its creator (or "principal") to handle money matters when they're incapable. 

The agent under a power of attorney or "agent-in-fact" should be trustworthy, able to reach sound decisions.

The most common type of POA document is a durable power of attorney. It helps avoid the need for a court-appointed conservatorship. A POA usually is effective upon signing. A "springing" POA goes into effect only after the principal has been found to be incapacitated.

3. Last Will and Testament: A will directs the distribution of your assets after you pass away and names your personal representative(s). 

In a will, parents of minor children may appoint a guardian for them. 

A will covers only probate assets; "non-probate assets" are not subject to the probate court process. Non-probate assets include: 

  • Jointly owned property
  • Trust-held assets
  • Life insurance proceeds
  • Financial accounts with beneficiary designations (a 401(k), bank accounts, etc.)

If probate is required, a will becomes public record. (In some cases, a trust can be used to avoid probate.) 

If you die without a will, depending on state law, a court could make decisions that go against your final wishes. Don't miss the opportunity to ensure your legacy reflects your desires.

4. Beneficiary Designations: Naming beneficiaries on your financial accounts automatically grants them access after you pass away. It's faster and costs nothing compared to the probate process.

If you don't name beneficiaries or make a will, courts could decide who gets the money from life insurance policies, retirement accounts, or transfer or payable-on-death bank accounts. The funds might be taxed or go to creditors.

Digital assets not only include currency, but social media or other online accounts, which may be listed in a letter of instruction on paper or a thumb drive. Personal data is best kept private and offline.

5. A Trust: A trust holds assets for distribution during the creator's life (in case of incapacity) or after their death. A trustee manages the assets for beneficiaries like children, other relatives, pets, or institutions.

A trust can be used to:

  • Avoid probate
  • Reduce estate taxes
  • Provide for minors, beneficiaries, or those with special needs
  • Protect property from creditors

Trust assets usually remain private.

Common types of trusts:

  • Testamentary trust: A trust formed as part of a will.
  • Revocable living trust: The creator (or "grantor") keeps control during their lifetime; the assets pass to beneficiaries upon the creator's death.
  • Special needs trust: A trust that holds assets to help someone who needs regular care qualify for public assistance.

The Comfort of a Custom Estate Plan 

Online estate planning documents cover the basics but could be incomplete or not current with state law. A personalized rather than a “one-size-fits-all” estate plan suits your unique needs and situation, leaving no stone unturned. Every carefully drafted detail exists to fulfill your wishes. 
Having everything signed, sealed, and delivered brings relief. With regular reviews and updates (as necessary), you no longer need to worry about your legacy or your loved ones' destinies. 

A comprehensive estate plan is an investment in the future. For a free consultation, contact us online or call (207) 377-6966.

About the Author

Daniel J. Eccher, Esq.

Daniel J. Eccher, Esq. is the Managing Shareholder at Levey, Wagley, Putman & Eccher, P.A., in Winthrop, Maine. Dan's favorite problem to solve is helping clients figure out how to afford long-term care while having something left for their family.

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