An estate plan can allow you to control the distribution of your assets after you die and offer financial security to your family. It can also help protect you by allowing someone manage your affairs and make medical decisions for you if you ever become incapacitated.
Estate planning
Estate planning is important for single individuals and parents with a family. It can cover important aspects of your life such as who would take care of your minor children, how assets will be divided and even who will care for your pet. An estate plan is now needed for digital assets such as email, social media and financial accounts.
Wills
A will is the basic foundation of a plan. It covers how your cash, investment, home, vehicles, and other assets would be distributed after you die.
Wills usually name an executor to handle your estate, pay its bills, file and pay taxes, sell property and distribute assets. Wills may also establish and fund trusts.
Appointing guardians for minor children is an important component. Otherwise, you will surrender that important decision to a court. Wills may also select a trusted person to care for your pet and fund their care.
Trusts
Trusts are legal arrangements where a trustee holds assets for a grantor for a beneficiary’s benefit. Assets may be held in a trust instead of your name.
Trusts can help keep assets from undergoing probate which can be costly and time consuming. Unlike wills, trusts are not public documents.
Trusts often have specific rules on when and how beneficiaries can receive assets. This is important if beneficiaries are minors, financially unsophisticated or irresponsible, or have special needs.
Incapacity
Three documents can assure that someone can make important decisions on your behalf if you ever become incapacitated.
A financial power of attorney authorizes an agent to manage your legal and business affairs. Agents can pay bills and invest money on your behalf, among other things.
Health care directives include a plan on your treatment if you are unable to make or communicate decisions. First, a living will contains your end-of-life care preferences. A health care proxy authorizes a person to make medical decisions on your behalf in accordance with your directions.
Beneficiaries
Retirement accounts, insurance policies, pensions and other accounts contain named beneficiaries. These named individuals will receive those assets regardless of what is contained in your will or trust. It is important to update beneficiaries periodically and especially after important life events such as marriage, a relative’s death, births, or divorce.
Attorneys can assist you with developing a plan that addresses your family’s needs. They can help you update it periodically.