As approximately 12,000 people die each year in Minnesota without a will, it is apparent that a significant portion of the population believes estate planning is either unimportant or unnecessary. However, having an estate plan often times plays an essential role in ensuring family harmony and a manageable transition after the death of a loved one. Additionally, having an estate plan will significantly reduce costs and provide for a timely estate administration.
An estate plan can ensure that your health care wishes are followed in the event of your incompetence, appoint a guardian for your minor children, and protect your family assets from a beneficiary’s potential divorce, creditor and substance abuse issues. Further, successfully planning your estate will ensure that your assets are organized and titled properly, beneficiary designations are executed correctly, potential estate, gift and generation-skipping transfer taxes are minimized or eliminated, and the succession of your business interests are strategically planned.
In the simplest of situations, every adult — regardless of age, health, wealth and marital status — should have a properly prepared will, power of attorney, and health care directive. Each document serves a unique, but important purpose.
Your will takes effect at your death to dispose of your property how you choose. You can use a will to appoint a guardian of your minor children, establish trusts for your beneficiaries, and appoint a personal representative to manage your assets and estate affairs after your death. If you do not appoint a guardian or a personal representative, the court will appoint someone for you. Importantly, because a will is not controlling while you are alive, it is essential to plan for a potential period of incompetence by executing a power of attorney.
A power of attorney authorizes another person to manage your financial affairs during your lifetime. Most powers of attorney are durable, which means they will continue to be valid after you become incompetent. Powers of attorney cease to be valid immediately upon death.
A health care directive allows you to authorize another person to make health care decisions for you if you cannot make and communicate them. Further, you can communicate your wishes about organ donations, provide directions for the care you do and do not want to receive, indicate where and from whom you will receive care, and make choices about your funeral and burial.
In short, estate planning involves personal decisions that will greatly impact you and your loved ones. These decisions should not be made by someone appointed by a court, or by family members experiencing a significant amount of grief and stress in circumstances demanding immediate decisions. These decisions should be made by you.