Planning for Death is Not the Most Important Part of Estate Planning

Death is inevitable. To some, it can come earlier; others can linger for quite some time. If you have amassed considerable wealth, it is important to consider planning what happens to your estate when you are gone. 

Planning what happens after you are gone is a good idea. It may be more prudent to plan for what would happen if you are incapacitated because such plans would directly impact your life. 

What Is a Will, and Why Is It Important?

A will is a legal document that stipulates how a person's estate should be distributed after they are gone. Often people write a will to ensure that they do not leave feud  and division in their family after they are gone. 

The best approach when writing a will is to write it in the presence of a witness, preferably your lawyer, to minimize the chances of having it challenged or even thrown out by the probate court. 

The will comes into effect once the estate owner dies. But before it is implemented, it has to go through a probate court. This means it may not address what the estate owner would love to see in the event of incapacitation.

Understanding Power of Attorney

If you want to ensure that you are well taken care of in the event of incapacitation, it would be best to appoint an agent to act on your behalf through a power of attorney. A power of attorney is a document written by the principal where they appoint a person they would want to act as their agent in the event they are incapacitated.

In a perfect world, the person with power of attorney should put the principal's interests before theirs, but that doesn't always happen. So, it is essential to ensure you choose a person you can trust. 

You may need to have two power of attorney documents; one that appoints your financial agent, another that chooses the type of healthcare you would need, and the agent responsible for making those choices. 

Different Applications

A power of attorney works directly opposite to a will; the last will kicks in after death, while a power of attorney ceases at death. 

This means while a person may have had the power to make financial decisions like transferring funds, clearing bills, and making payments on behalf of the principal, that person cannot continue doing so after the principal dies. 

Avoiding Probate

The will and power of attorney are equally important. But if you do not want your estate to go through probate, which can be costly and a source of contention, there is a way out. 

Writing a living trust is the most effective way of planning what happens to your estate without having your dependents go through probate. A living trust is best if you have underage children because the trustee manages your estate until your children come of age and assume control of the estate.

Other options for avoiding probate include owning property jointly with the person you want to assume ownership. For example, suppose you are married and register your property under your name and your spouse's. In that case, the spouse automatically assumes full ownership of the property unless you direct otherwise in a will. 

You could also consider holding bank and retirement accounts jointly. This option doesn't only apply to married couples. It applies in all cases where the property is owned jointly.