An estate plan is a collection of documents that can help you protect your assets and ensure that your wishes are carried out in the event of your death or incapacitation. It typically includes a will, guardianship designations, health care power of attorney, beneficiary designations, durable power of attorney, and a letter of personal intent. A trust is also an important part of an estate plan as it can help keep your assets out of probate and set detailed rules for when and how beneficiaries receive their inheritance. A comprehensive estate plan should also include specific plans for getting the treatment you would want when you can't make or communicate decisions.
Designations of beneficiaries in things such as retirement accounts supersede any instruction in your will or trust, as these assets go directly to the beneficiary. Common documents include a last will and will, a power of attorney, a living will, and a power of attorney for health care. Some people also need one or more trusts. Insurance policies could also have a place in your estate plan.
Living Wills, Health Care Representatives, & Advance Health Care Directives are all important components of an estate plan. A will is the best-known and most overlooked component of an estate plan. Many people feel they don't have enough assets to justify creating a will, but this is not true. A will is an important document as it is the legal record of your wishes and the designation of your assets.
With a will, you can choose the people who will receive specific assets. When creating your will, be sure to include your family and friends in the conversation, especially if you plan to leave them a large asset such as the family business or a house. Having conversations beforehand can help you better plan and prepare for the future. With wealth taxes rising, many families are turning to housing part of their estate in a trust to preserve more for their loved ones.
A trust can be a great way to pass money on to the next generation while easing the burden of some wealth taxes. A financial power of attorney (POA) is someone you designate to make financial decisions on your behalf in case you become incapacitated or unable to make decisions yourself. Choosing a financial power of attorney is an important decision, and it should be someone who is like-minded who can handle liability tactfully and carefully. When you choose someone, take some time to talk to them about what you want and what you expect from them when it's time to take on that role.
Having a candid and open conversation about it will prepare them for the responsibility ahead of them, but it will also give you the opportunity to let them know how you want your assets to be managed. Just like you'll need someone to preside over your financial and legal affairs, you'll also need someone who can make medical decisions on your behalf, which is where a health care power of attorney comes into play. A health care POA will make medical decisions on your behalf if you are unable to do it yourself. In addition to selecting a health care POA, it is also prudent to create a living will which stipulates your medical wishes including intensive care, life support, and other medical options.
Your health care POA should be someone who is like-minded who supports your wishes and carries them out the way you want them to. Your beneficiaries are crucial to your estate plan since they are the ones who will inherit your assets so it is important to choose the people you really want. Be sure to inform your beneficiaries in case of any life-altering circumstances such as divorce, remarriage or new child so that everything remains up-to-date. The beneficiary designation replaces the one in your will so discrepancies can lead to costly mistakes and family tensions which are best avoided if possible.
If you have children under 18 years old then a guardian's name should also be included in your estate plan as they will take care of them both personally and financially until they are old enough to do it themselves.