The main analogy I use when I explain estate planning to clients is this: "An estate plan is like a toolbox." Most toolboxes have several "main" tools - a hammer, wrench, screwdrivers, nails, etc. If something breaks in your home, how can you fix it if you don't have a toolbox? If you don't have a legal toolbox, then how can your loved ones help you when things go wrong? A solid "legal plan" also has some main ingredients - basic tools that most clients should have in case something occurs.
The four major components of most estate plans are:
1) A Living Trust - an enforceable legal document that outlines who is entitled to manage your affairs if you can no longer handle them (these are your "successor trustees"). The trust governs everything in the name of the trust or payable to the trust. Also, everything in the name of the trust avoids the court system.
2) A Will - most estate plan use this tool as a backup to the trust. It's more specifically known as a "pour over" will. If you forgot an asset outside the trust, and if court involvement is necessary, the will directs the judge to put your asset into your living trust. The person in charge of your will is called your "executor."
3) A Durable Power of Attorney - This document allows someone known as your "agent" to act on your behalf in most other circumstances. While the "trustee" handles assets in the name of the trust, the agent under power of attorney can act on your behalf when dealing with issues not directly trust-related. By called it a "durable" power of attorney, it means the document is effective even if you are incapacitated - which is basically when you'd want it to be effective after all.
4) An Advance Health Care Directive - This document allows someone known as your "agent" to make health care decisions on your behalf. A solid health care directive addresses more than simply "end of life" issues such as the proverbial "pulling of the plug." Your agent can be your advocate when necessary and direct your health care in your best interests.
Please call my office at (661) 414-7100 for help with your estate planning needs. Also, visit our videos page to learn much more about estate planning basics. You can also see our free webinar.
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