Estate planning is an important part of ensuring that your assets are managed according to your wishes. It involves creating a plan for how your assets will be distributed after you pass away or become incapacitated. There are several components to an estate plan, including a will, trust, health care directives, and designations of beneficiaries. A will is the most well-known component of an estate plan.
It is a legal document that outlines how you want your assets to be distributed after you pass away. It also allows you to name a legal guardian for your children in case something happens to you and the other parent. A will is a public document after it is filed with the court, so it is important to keep it up to date. A trust is another important component of an estate plan.
It is a legal agreement in which a trustee holds the assets of a grantor for the benefit of a beneficiary. Trusts can help keep your assets out of probate, which can be a time-consuming and costly process. They can also set detailed rules for when and how beneficiaries receive their inheritance. Unlike a will, a trust can eliminate the need to create public records.
Health care directives are also an important part of an estate plan. These documents provide instructions for getting the treatment you would want when you can't make or communicate decisions, no matter how old you are. Without proper health care directives, you may not get the treatment you want. The most common documents include a last will and will, a power of attorney, a living will, and a power of attorney for health care.
Designations of beneficiaries in things such as retirement accounts supersede any instruction in your will or trust. This is because assets that go to a designated beneficiary generally do not become part of your estate or trust; they go directly to the beneficiary. Insurance policies could also have a place in your estate plan. You should also consider appointing a power of attorney in your estate plan.
This person will have the authority to take charge of your financial and legal affairs in case you become incapacitated. It is preferable to having a court name as a guardian for you, and it helps ensure that there is as little disruption as possible in your affairs. Once you have created an estate plan that fits your needs, it is important to review it regularly and whenever you experience major changes in your life. If you have doubts about the process, it might be worthwhile to consult a probate lawyer and possibly a tax advisor.
