Estate planning is the process of preparing for the management of a person's assets in the event of disability or death. It involves creating a will, which is a legal document that outlines how a person's assets should be distributed after their death. Estate planning also includes setting up trusts, appointing a health care proxy, and reducing the financial size of the estate through donations. A will is the most common basis of an estate plan and provides instructions for managing your estate assets after death.
It may indicate who will receive cash, investments, housing, vehicles, valuables, and other items. Houses, land or other real estate, current and savings accounts, and certificates of deposit are all assets that could constitute a person's estate. It is important to assign a health care proxy in your estate plan so that someone can make important decisions in your life when you can't. You may also want to include a Power of Attorney (POA) in your estate plan so that someone can make financial decisions for you if you become injured or sick.
When creating an estate plan, it is important to consider setting up a trust for your children. This is because assets that go to a designated beneficiary generally do not become part of your estate or trust. Donations are also beneficial as they reduce the financial size of the estate and are excluded from taxable wealth, which reduces the wealth tax bill. If you don't have an estate plan, financial decisions about your money, health care, and other issues may not be made the way you want them to. Creditors usually have a limited amount of time from the date they were notified of the testator's death to file claims against the estate for the money owed to them.
By considering the common essentials as you shape your estate plan, you can better reduce the financial and emotional impact of your death or disability on your loved ones. Estate planning isn't just for those with wealth; anyone can benefit from having an estate plan in place. If your estate is small and your wishes are simple, an online or bundled will writing program may be sufficient for your needs. Depending on the intentions of the property owner, a trust may come into effect during your lifetime (living trust) or after your death (testamentary trust).