Estate planning basics everyone needs to know

It doesn't take much scanning of the news these days to hear all about what happens to people after they die. Recent stories about the battles for the estates involving Michael Jackson and Anna Nicole Smith remind us that today, more than ever, it is important to accurately record your wishes for important matters such as your property and family.

Estate planning may sound like something that is reserved for the rich and famous, but in reality, it is something that everyone should be familiar with and incorporate into their own lives. No matter how much or how little your estate is worth, it is important to have an estate plan for several reasons. Before explaining why one is necessary, however, it is essential that we first clarify exactly what estate planning is.

What is estate planning?
In its simplest sense, estate planning is the process that an individual or couple goes through to prepare for the disposal of their estate. An estate plan can include the following:
- Will
- Living will or health care proxy
- Assignment of power of attorney
- Trust(s)


Defining Key Concepts

Wills & Living Wills
A will establishes the exact details regarding who will inherit any assets or property that you leave behind when you die. A living will is an entirely different document, also referred to as a health care proxy. This document provides instructions to medical professionals in the case where a person has a terrible injury or accident. A living will informs the medical teams about whether or not to use life support in the case of terminal illness or a permanent vegetative state.

Power of Attorney
When you assign power of attorney to someone, they will have the ability to make decisions regarding your estate, including the management and transfer of all assets, communicating with the IRS, amending existing trusts, creating new trusts, and make gifts from your estate, if you pass away or become otherwise incapacitated.

Probate
The goal of planning your estate is to ensure that your assets are transferred to the desired parties without the hassles involved with probate. Probate court is where a will is filed and validated, and after one's death, the will must go through this establishment to ensure that all debts are satisfied and taxes paid before the assets are passed along to the heirs. This can result in a significant time delay as well as using up a sizable portion of the estate to pay for the proceedings.

With estate planning from someone with experience and a thorough knowledge of the laws relating to this area of practice, the assets you have worked hard to accumulate and protect will be passed to the people you choose without wasting time or resources. Contact a professional in your area to begin this process and design an estate plan that makes sense for your situation and needs.