5 Critical Components of an Estate Plan
An estate plan is important for people of all ages and wealth levels. Yet many people avoid estate planning because they do not want to think about the end of life, the possibility of failing health, or potential for an unfortunate disability. There is no time like the present to overcome those fears, stop procrastinating and start planning for your future. Pulling back the curtain on what makes up a solid plan may help put you at ease.
Your “estate” is all the property owned both individually and jointly with your spouse—including bank accounts, real estate, jewelry, IRAs, investments—minus that which you owe. If you pass away without a plan, the result is a long, drawn-out probate process that can be very expensive for the family. Being prepared will provide peace of mind for the you and all of your beneficiaries. So let’s get started.
The Top 5 Items That Should be Included in Every Estate Plan
- Living Trust – A living trust is a legal document that names someone to take care of your trust assets if you are incapacitated and details who you want to get your estate upon your death. The benefit of a trust is that it does not go through probate, unlike a Will. Probate is a court process where a judge oversees the transfer of your estate to your heirs and of distributing your assets to heirs the paying off your debt. It sounds simple, but it is a very costly and time-consuming process and is a huge hassle (ask anyone who has been through the probate process)!
- Will – If you have a living trust, your Will acts as a safety net for assets you forgot to put into your trust during your lifetime. The Will takes those out of trust assets and pours them into your trust (a “Pour-Over Will”).
- Living Will – A living Will outlines your wishes for end-of-life medical care. It can include what medical treatments you would (or would not) like to have in the event you become incapacitated. A living Will removes the stress of making these decisions from family members and helps to provide peace during times that can be difficult and emotional. This can be the most important document in your estate plan.
- Advance Health Care Directive – An Advance Health Care Directive (AHCD) is a document in which you choose someone to make health decisions for you if you are unable to do so yourself. The Living Will describes your wishes; the AHCD names the person who communicates these to all pertinent healthcare parties.
- Durable Financial Power of Attorney – A durable financial power of attorney names an agent who has the power to act in your place for matters relating to finances. This may include paying your bills, accessing your financial accounts, managing your real estate assets, etc. Again, the word durable means that it stays in effect if you become mentally incapacitated and unable to handle your affairs.
Consulting and planning with an estate planning attorney will help to ensure that all your options are explored and the best possible solution for you is implemented. We can walk you through the necessary parts of the estate plan, provide explanations, and create strategies for maximizing your assets and protecting them from unnecessary taxes. We are here to help put your mind at ease.