If you’re like many people, you’ve thought about making an estate plan, but you just never get around to doing it. Perhaps you’re too busy, or maybe you’d rather avoid considering what will happen in the even of your incapacity or death. Although these concerns are understandable, estate planning is a vital component of your financial well being, and one that’s bet tackled sooner rather than later.
Why you need an estate plan.
An estate plan is designed to provide financial security for your family, ensuring that your property will be preserved and passed on to beneficiaries. IN addition it can minimize estate taxes and other administrative costs, ensure competent management of your property iin the case of incapacity, enable you to provide for a favorite charity and help mitigate or avoid disputes among family members.
Having lost both of my parents in the last four years I can’t tell you how true this is. My mother always had all of her affairs in order. When she passed away it was an easy estate to settle and there was minimal costs involved.
My father was another story. He was still working on getting his affairs in order when he went into the hospital. As a result we had to hire an attorney and it took three years to settle the estate with the attorneys getting the bulk of his estate.
Now contrary to popular belief you don’t need to have significant wealth to have an estate plan. Basic estate planning is for everyone. Putting a plan in place will help you protect assets during your life and control how you wish your estate to be distributed on your death, as well as ease the administrative burden on you family.
There are three basic components of your estate plan: a durable power of attorney for financial matters, a health care power of attorney and a last will and testament. What are each of these components?
Durable Power of Attorney
This document allows you to appoint someone to handle your financial matters in the event that you become incapacitated.
Health care documents
A health care POA allows you to name an individual to make medical decisions on your behalf in the event you are unable to do so. It may be used in conjunction with a living will, which authorizes your health care provider to take specific actions in the event that life-sustaining decisions need to be made.
Last will and testament
A will dictates who will receive your property upon your death and under what circumstances. It also enables you to direct the payment of estate administration expenses and taxes and to nominate an executor to handle these matters. It also allows you to designate a guardian for your minor children.
A revocable trust allows you to maintain control and ownership of the trust assets during your life and direct how and when your beneficiaries will receive trust distributions upon your death. By funding a revocable trust during your life, your assets will avoid probate administration.
Remember a will governs only probate property; a trust governs only assets owned by the trust. It is also important to review the ownership and beneficiary designations of such assets as jointly held property, life insurance proceeds, retirement benefits, employee death benefits and retirement plan proceeds.
This may all seem a bit overwhelming but working with an experienced professional will help you to plan. The time to start your estate plan is now!