Estate planning is one of those phrases that tend to confuse most people. Many people really don't know what documents consists of estate planning documents. I don't blame them as the term estate planning somehow confers a meaning that someone must have an estate. And people think of estates as those lovely homes off of Newport Coast or a spread in the Hamptons.
Generally whenever someone dies, whatever they leave behind is called their estate whether it be assets or debts. So, estate planning is really planning for handling your affairs after you die.
In some instances, estate planning is also incapacity planning. As if who would manage your affairs if you were alive but deemed unable to manage your affairs. You got into a car accident. You developed dementia.
I wish there was a better phrase for estate planning. Anyone have any ideas?
Without reviewing your personal situation, the basic estate planning documents suitable for most Americans who are worth less than $5 million are generally the following documents:
1. Will
2. Living Trust
3. Durable Power of Attorney
4. Advance Health Care Directive
The Will names a guardian for your minor children.
The Living Trust holds title to your property, spells out who should get what and names a successor trustee to manage your trust property either if you died or became incapacitated without going to court.
The Durable Power of Attorney nominates someone to manage your financial affairs while alive, but unable to do so.
The Advance Health Care Directive names someone to make medical decisions for you in the event you are unable to do so and where you can indicate your wishes for end of life choices.