Through misinformation, misunderstanding, and miscommunications, many people are unfortunately left with the false idea that when we talk about estate planning we are simply talking about drafting up a will or even a trust. However, there is so much more that is included when drawing up an estate plan. And it is important that you know exactly what they entail so that you can make sure that all of your assets are going to seamlessly be transferred to your heirs upon your passing. Though, a good estate plan may also include provisions for your family members to be able to take control of your assets if you should ever become unable to take care of them yourself. With that simple but common misconception out of the way, it is important that you know the simple basics of estate planning.
The Basics of Estate Planning
One of the very first things you need to know about estate planning is that it is not simply for the wealthiest among us. Everyone on any income level can benefit from making sure that their assets and finances will be properly taken care of and divided up when they die.
When you pass away, if the proper paperwork and planning are not taken care of, then probate court may end up being the place where your assets are distributed, and there is no guarantee that they will be divided accurately or as intended here. This can be avoided with proper estate planning because this process involves giving a family member or an attorney the permissions needed to carry out your wishes both when you pass and if you are even incapable of doing so yourself while still alive.
The Must-Haves of Estate Planning
When it comes to your estate planning, there are plenty of things that can be included, but these are the things that everyone needs to include:
Wills and Trusts
While will and trusts can sound complicated – and a lot of people associated complicated with expensive – these are not things that are only for the rich. In reality, this could not be further from the truth. In fact, a will and trust should be included in every estate plan, even ones where the assets involved are not substantial. Wills will help make sure that your property is distributed according to your personal wishes, while trusts can help limit the amount of estate taxes or legal challenges.
Durable Power of Attorney
One of the most important things you can do is to draft a durable power of attorney. This means someone who will be able to act on your behalf when you are not able to represent yourself. If you do not name a power of attorney, it may be left up to a court to decide what will happen with your assets if you are ever found to be mentally incompetent. This can be bad, because a court’s decision may not line up with the decisions that you want to be made.
Some of your possessions are able to be passed down to an heir without having been directly dictated to them in the will. As such, it is vital that you build and maintain a beneficiary on accounts such as 401(k) plan assets. However, a beneficiary can also be included on insurance plans because they too can be passed on outside of a will’s writing.
If you do not name a beneficiary – or your named beneficiary is unable to serve – the distribution of your funds may be left up to the court.
Letter of Intent
This is simply a letter that will be left for the beneficiary or the executor of your will. The purpose of this letter is to set out the parameters of what you want to be done with your assets after you pass or are incapacitated. Sometimes these letters of intent can include funeral details and other types of special requests. While a letter of intent may not be able to stand up to the eye of the law as valid, it will go a long way towards informing those left in charge of your assets (even if it is a probate court) of your intentions, and can go a long way in helping distribute your assets.
Healthcare Power of Attorney
While it is usually a spouse or a family member, naming a healthcare power of attorney is a process that designates an individual to make healthcare decisions on your behalf if you become incapacitated. Because of this, it is important that you pick someone you trust absolutely and someone who shares your views.
A lot of wills and trusts will include this automatically, but if yours does not, it is still a good idea to make sure your estate plan includes one. Whether you have kids or think you will have children, picking a guardian is an important thing that often gets overlooked.
Contact us today to begin the estate planning process.