A common misconception is that a will or trust is all needed for an estate strategy. However, much more must be included in your estate plan to ensure that your assets pass to your heirs without a hitch.
Certain legal instruments, such as a health care power of attorney and a will or trust, are essential in estate preparation. If you become incapacitated and unable to manage your affairs, a good estate plan will include provisions that give your loved ones access to or control your assets.
Need-to-Haves for Your Estate Plan
The following is a comprehensive estate planning checklist:
- Will/trust
- Lasting Power of Attorney
- Designating a beneficiary
- Letter of intent
- Healthcare power of attorney
Insurance products, such as long-term care insurance to cover old age, a lifetime annuity to generate some level of income until death, and should also be considered as part of a well-thought-out estate plan in addition to the six documents as mentioned earlier and designations.
Wills and Trusts
You may think that having a will or a trust is something only the wealthy need to worry about. That is a very wrong evaluation. Even if you don't have much money, you should create a will or trust as part of your estate plan. A will guarantees that one's assets will be allocated as specified in the document.
Some trusts can reduce the likelihood of legal complications or estate taxes. It's not enough to have a will or trust, though. The precise language of the paper is crucial. All your property, not only the stuff that goes via a will, should be distributed under your wishes, so make sure your will or trust reflects that.
Lasting Power of Attorney
Having a durable power of attorney (POA) in place ensures that your agent or the person you choose will be able to take legal action on your behalf if you become unable to. If you don't have a power of attorney in place and a judge determines that you're mentally incompetent, the money and property you own may be distributed in a way you wouldn't approve of.
With this document, you can delegate legal authority to another person so that they can act on your behalf in business and financial dealings and in other situations where you would otherwise have to make choices under the law.
Designating A Beneficiary
Several of your assets may transfer to your heirs regardless of the terms of your will, as was previously mentioned. Because of this, it's crucial to name a beneficiary and a backup beneficiary for the account.
In the absence of a beneficiary designation or the beneficiary's incapacity or death, the distribution of your assets may be left to the court's discretion. An impartial judge will not make the same choice as you would since they do not know your background, values, or goals.
Letter of Intent
Simply put, a letter of intent can be any written document left to an heir or beneficiary. The point is to spell out what you want to be done with specific assets in the event of your death or incapacity.
Additional funeral arrangements and specific requests are included in some letters of intent. Even if such a document is not legally binding, it can nonetheless assist a probate judge in understanding your wishes and guide the division of your assets.
Healthcare Power of Attorney
If you become incapacitated and cannot make choices about your healthcare, a healthcare power of attorney allows you to appoint another person to act in your place. If you're considering signing something along these lines, it's important to find someone you can confide in, who understands and shares your values, and whose advice you can reasonably expect to accept.
Exactly What Is An Estate Plan?
An estate plan is a set of legal papers that spell out your preferences in the event of your death or incapacity. These documents may include a will, guardianship designations, healthcare power of attorney, beneficiary designation, a personal statement of intent.
Should I Make an Estate Plan?
Everyone should have a will, but not everyone needs an estate plan. No matter how much or how little money you have, it's crucial to have a plan to ensure that your assets go to the people you've designated as beneficiaries after your death.
The Conclusion
Drafting a will is a good first step, but it's not the only one. Choosing a beneficiary for your assets after death is only one part of estate planning. It's also about ensuring your loved ones, whether temporary or permanent, have access to your assets and can live comfortably in the event of incapacitation.
