You know you should get your estate in order, but all the terminology flies over your head. Will, trust, beneficiary - it's like estate planners speak another language. Don't let the jargon intimidate you. Estate planning is not as complicated as it seems. This glossary breaks down the basics in simple terms so you can navigate the process with confidence. We'll walk through the key terms in plain English so you can wrap your head around wills, trusts, taxes, and everything in between. With this simple guide by your side, you'll be an estate planning pro in no time. Now take a deep breath - you've got this!
Estate Planning 101: Why You Need a Will, Trust, and More
A Will
A will is a legal document that outlines how you want your assets and property distributed after you pass away. Without one, the state will determine who inherits what. That’s why creating a will is so important—it allows you to specify who gets your money, property, and other assets. 
A Living Trust
A living trust is a separate legal entity that holds your assets to be distributed according to your wishes after you die. Unlike a will, a living trust lets your heirs avoid the probate process, which can save them time and money. A living trust also allows your assets to be managed by a trustee in case you become incapacitated.
Power of Attorney
A power of attorney authorizes someone else to act on your behalf for legal and financial matters. There are two types: durable and medical. A durable power of attorney allows your designated agent to handle financial and legal affairs if you’re incapacitated. A medical power of attorney allows your agent to make health care decisions for you if you can't.
Advance Directives
Advance directives, like a living will and health care proxy, outline your wishes for medical care if you become unable to communicate them yourself. A living will specifies the types of life-prolonging medical care you do and don't want. A health care proxy designates someone to make medical decisions for you if you're incapacitated.
Between wills, trusts, powers of attorney, and advance directives, estate planning may seem complicated. But creating these documents will give you peace of mind and make things easier on your loved ones during a difficult time. Meet with an estate planning attorney to review your options and set up the plan that's right for your needs.
Key Estate Planning Documents Simplified
To properly plan your estate, there are a few essential documents you need to understand. Let's break them down in simple terms:
Will
A will is a legal document that specifies how you want your assets and property distributed after you pass away. It allows you to name an executor to handle the distribution of your estate, nominate a guardian for any minor children, and specify how you want your assets divided among beneficiaries like family, friends, and charities.
Living Will
A living will, also known as an advance healthcare directive, outlines your wishes regarding medical care in the event you become incapacitated or unable to communicate. It allows you to specify whether or not you want life-prolonging medical procedures performed to keep you alive.
Power of Attorney
A power of attorney authorizes someone else, known as your "agent" or "attorney-in-fact", to act on your behalf for financial and legal matters in the event you become incapacitated. There are two main types: a durable power of attorney which remains in effect even after incapacitation, and a springing power of attorney which only comes into effect once a specific event occurs, such as incapacitation.
Trusts
A trust is a legal document that allows you to set aside money or property to be used and distributed according to your wishes, both during your lifetime and after you pass away. The three main types are living trusts, charitable trusts, and special needs trusts. Trusts are more complex but also more flexible than wills alone.
With these essential documents in place, you can have peace of mind knowing your final affairs and the wellbeing of your loved ones will be properly taken care of. While estate planning may seem overwhelming, starting with the basics can help make the process more manageable.
Understanding Power of Attorney and Health Care Proxy
A power of attorney and health care proxy are two important legal documents that allow you to appoint someone to make decisions on your behalf if you become incapacitated.
Power of Attorney
A power of attorney (POA) allows you to designate an agent to act on your behalf for financial and legal matters. There are two types:
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A durable POA remains in effect if you become incapacitated. This allows your agent to handle essential financial tasks like paying bills if you cannot.
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A springing POA only takes effect if you become incapacitated. This gives you control over your affairs as long as you are able.
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Choose an agent you trust, like a family member or close friend. Discuss your wishes with them openly and specifically authorize what actions they can take on your behalf.
Health Care Proxy
A health care proxy, also called a durable power of attorney for health care, appoints someone to make medical decisions for you if you cannot. Discuss your values, priorities, and wishes regarding medical treatment in depth with your health care agent. Provide as much guidance as possible so they can make the choices that align with your preferences.
Without these documents, family members may have to go to court to gain control over your financial, legal and medical affairs in the event of your incapacity. Taking the time to prepare POA and health care proxy forms gives you peace of mind that your wishes will be honored even if you cannot express them yourself. Discussing your decisions with loved ones in advance also helps avoid conflict and ensures your agents have a clear understanding of your preferences. Estate planning may not be the most enjoyable task, but preparing these essential documents will give you confidence in your future.
Creating a Living Trust to Avoid Probate
A living trust is a legal document that allows you to place your assets into a trust while you're still alive. Unlike a will, a living trust avoids probate after your death. Probate is the legal process where a court oversees distributing your assets according to your will. This process can be lengthy, costly, and public.
How a Living Trust Works
With a living trust, you transfer ownership of your assets like your home, bank accounts, investments, and personal property into the trust. You name yourself as the trustee, so you maintain full control of your assets during your lifetime. You also name a successor trustee to manage the trust after you pass away.
The successor trustee distributes your assets to your beneficiaries according to your wishes, avoiding the probate process. Living trusts are private documents, so the distribution of your estate remains private. The successor trustee has a fiduciary duty to manage the trust in the best interests of the beneficiaries.
Funding Your Living Trust
To fully utilize a living trust, you must fund it by transferring ownership of your assets into the trust. Work with your estate planning attorney to determine what assets should be transferred and how to properly transfer each type of asset. Common assets placed in a living trust include:
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Your home and other real estate
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Bank and investment accounts
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Vehicles
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Personal valuables like jewelry and art
It's important to keep good records of the assets in your trust. Review the trust periodically and make any needed changes to the assets listed or your beneficiaries.
Creating a living trust requires time and legal guidance to set up properly. However, a living trust can save your loved ones significant time, money, and hassle by avoiding the probate process after you're gone. With some upfront investment, a living trust provides peace of mind that your final wishes will be carried out privately and efficiently.
Conclusion
So there you have it - the estate planning basics broken down into simple, bite-sized explanations. While the concept of planning for your assets and end-of-life care can seem overwhelming at first, you've now got all the key terms and definitions at your fingertips. Armed with this glossary, you can approach those critical conversations and decisions feeling way more confident and informed. The goal here was to cut through the jargon and complexity, so you can wrap your head around estate planning in a straightforward, non-intimidating way. With the foundations in place, you'll be ready to work with your Brooklyn estate planning attorney, your advisor and family to put together a customized plan that protects your wishes and provides for your loved ones' future. The planning process doesn't have to be scary or stressful when you have the right knowledge. So take a breath, grab your glossary, and let's start mapping out your legacy - one simple step at a time.