When you decide that the time has come to start planning your estate you will have to do some research to get a feel for what the process entails. The reality is that there are some rather complex strategies that can be implemented when necessary, and these are often times needed as way to reduce the asset erosion that can be caused by the estate tax. To develop a comprehensive working knowledge of estate planning it is going to take some time and effort, but there are some basics that can serve as a good starting point and we would like to cover them here.
To break it down to its simplest form, you are first going to need some vehicle or vehicles of asset transfer. The most common one of these is the last will, and most people are well aware of the existence of such a document. The thing about using a will to transfer assets that can be troublesome is the fact that it must pass through probate. Probate is the legal process of estate administration, and people sometimes try to avoid it because it can be costly, it is time consuming, and it is public.
Many people who want to avoid probate do so through the creation of revocable living trusts. You fund the trust and name a trustee to administer it and beneficiaries who will ultimately receive distributions from the trust in accordance with your wishes as stated in the trust agreement. These asset transfers take place outside of the probate process.
The other component that is widely recommended involves advance health care directives such as a living will and a durable medical power of attorney. With the living will you state your preferences with regard to the medical procedures you would accept or deny in the event of your incapacitation. The durable medical power of attorney is used to appoint someone to act in your behalf should you become unable to make medical decisions for yourself.
In addition, you may want to include a durable financial power of attorney naming a representative of your choosing to make financial decisions for you should you become unable to do so at some point in the future.