When many people think of estate plans, they think of drafting a will and filing it away for the rest of their lives. However, this is not always an effective approach, and there are many additional tools that can help you achieve your estate planning goals. The following are six of the many possible components of a comprehensive estate plan.
1. Last Will and Testament
A will may not be the only document you need, but it is still an essential part of any estate plan. It ensures that the probate court will not distribute your property in accordance with intestacy laws; but rather as you designate how and to whom you want your property distributed. Also, you can designate the person you want to serve as the personal representative of your estate to administer your affairs after death. Importantly, a will also allows you to name a legal guardian for your children should something happen to both you and their other parent.
There are many benefits to creating a living trust, including avoiding probate when it comes to your trust property. Creating a trust involves drafting the trust agreement, naming a trustee to administer assets of the trust, and transferring your property and assets into the ownership of the trust. You will still be able to access and manage your assets as long as you are able, and then a successor trustee will take over should you become incapacitated or pass away. The successor trustee will then manage and distribute the trust property to your beneficiaries, in accordance with your instructions.
3. Power of Attorney
Unlike a will, you do not draft a power of attorney to use after your death, but in case something happens to you that renders you mentally incapable of handling your own affairs. You can give a trusted person the authority to take over your financial and legal matters should you become incapacitated. This is quite preferable to having a court name a guardian for you, and it helps ensure there is as little interruption in your affairs as possible.
4. Healthcare Directives
If you become incapacitated, a healthcare directive, which is similar to a power of attorney, can name a healthcare proxy to make healthcare decisions for you. Another document, called a living will, sets out your wishes for healthcare, and especially end-of-life care. Your healthcare proxy should be familiar with your living will and should be someone you can trust to carry out your wishes. These documents help to eliminate conflict if family members disagree about the nature of your care.
5. Beneficiary Designations
If you have life insurance policies, bank accounts, investment accounts, or retirement accounts, you want to ensure that you designate the right beneficiary for each account. When you name beneficiaries, the assets or benefits from these accounts can go directly to your beneficiaries, without having to go through probate.
Finally, you and your advisors will want to make sure that all of your documents and beneficiary designations work together in order to provide you and your family with the outcome you desire.
Once you have a comprehensive estate plan that suits your needs, you should review it on a regular basis, and whenever you experience major life changes. This process can provide you and your family comfort in the years to come.
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