Although many people think that having an estate plan is merely a will or a trust, it is much more. Proper documents can help ensure that all your assets are transferred to your heirs after death. Some of the most common estate planning documents include a healthcare power of attorney and a will.
An effective estate plan also allows your family members to manage your assets if you become incapacitated.Besides having the proper documents, an estate plan should also consider other financial products, such as life and long-term care insurance. These insurance policies can help ensure that your assets are distributed to your beneficiaries without needing court proceedings.
- A Will and Trust
Although a will or trust can be expensive, it shouldn’t be considered a waste of money. Proper documents can help ensure that your assets are distributed to your beneficiaries without needing court proceedings.
The wording of a will or trust should also be consistent with how you have left assets to your beneficiaries. For instance, if you have a retirement account and named your sister as a beneficiary, you don’t want to give the same asset to another sibling in the will. This could cause a legal battle and lead to bitter disagreements between both parties.
- Power of Attorney
A durable power of attorney is also vital to ensure that an agent or a person you have designated will be able to act on your behalf if you cannot do so yourself.
This type of power of attorney can also allow an agent or person you have designated to act on your behalf if you cannot do so yourself. This document can be used to make financial transactions and other legal decisions as if you were you. In some cases, it’s also a good idea for spouses to establish reciprocal powers of attorney. In other cases, it might be better to have a friend or financial advisor act as the agent.
- Beneficiary Designations
A number of your assets can pass to your heirs without requiring a will. This is why you must have a contingent beneficiary and a beneficiary on your retirement accounts and insurance policies. These types of accounts should also have these types of designations.
If you don’t have a beneficiary or the person you have designated cannot serve, then a court could take over and decide the fate of your assets. This is because a judge might not have the necessary knowledge about your situation.
- A Letter of Intent
A letter of intent is a document you left to your beneficiaries or an executor to determine what you want to do with your assets following your death or incapacitation. Some examples of letters of intent include funeral details.
Although a letter of intent might not be legally valid, it can still help a court determine what you want to do with your assets following your death.
- A Healthcare Power of Attorney
Before you sign a healthcare power of attorney, ensure that you have the right person who shares your values and beliefs. This person could potentially make essential decisions for you and could even have your life in their hands.
- Guardianship Designations
Although most wills and trusts feature this clause, it’s essential to ensure that you have the right person to look after your minor children. You should also ensure that the couple or individual you choose is genuinely interested in raising children.
If you don’t have these designations, then a court could take over and decide that your kids live with a family member you don’t want them to live with. In extreme cases, the court could require your kids to become state wards.