Often thought of as only for wealthy people, Estate Planning is an essential tool that can benefit anyone. It can help protect you, your assets, and your loved ones. The key to creating a solid estate plan is to start early and update it regularly. This way, you’re confident your financial future will be secure even after death.
Wills and trusts are essential in establishing how your assets will be distributed after death. Both documents provide the ability to make your final wishes known and protect your estate from potential tax liabilities in the event of a premature death or incapacitation.
Depending on your circumstances and your goals, you may choose to implement a will or a trust. Regardless of your situation, it is important to consult with an experienced estate planning attorney who can help you determine whether a trust or a will is appropriate for you and your family.
Trusts are often established during the grantor’s lifetime and facilitate the transfer of property to heirs without probate costs and publicity. They can be used to protect a family business or real estate held through entities not publicly identified with its owners, to preserve the generation-skipping transfer tax exemption, and to provide for the care of minor children who are disabled.
Often overlooked, a power of attorney is the most important legal document that a person can have. It gives another individual authority to act on your behalf and handles many aspects of your life and finances.
It is especially useful for seniors, who may not be able to manage their own affairs if they become incapacitated due to an illness or disability. It allows an agent to make decisions on your behalf, such as paying bills, selling assets, and implementing Medicaid planning.
Before signing a power of attorney, be sure to read all of the information. If you are not clear about what it is you want to give your agent, it might be a good idea to speak with an estate lawyer.
Advance directives, such as a living will or durable power of attorney for health care, allow you to decide ahead of time what kinds of medical treatment you want or don’t want if you can no longer speak for yourself. They are legally recognized and can be honored even in situations where caregivers cannot follow your wishes exactly.
Planning for your future medical care is important for anyone, regardless of age or health. Having conversations with your loved ones and completing legal documents like advance directives is key to preparing for the unexpected.
Usually these forms are notarized or witnessed. They must include an appointment of an agent to make decisions for you, and instructions about the medical choices you wish to make. Your agent can be your spouse or child, or you may choose someone else to act on your behalf.
Having beneficiary designations on your financial accounts — including bank and investment accounts, retirement assets, life insurance policies, and more — is a simple and cost-effective way to transfer wealth to loved ones without probate. The funds in these accounts are typically payable to your beneficiaries immediately upon your death.
However, this approach can result in unintended consequences if the beneficiary designations are not coordinated with your overall estate plan. For example, you might wish to leave your financial assets to your children until they reach age 25 or are married.
Your beneficiary designations should be reviewed and coordinated every few years, especially when you experience a significant life event such as marriage, birth, or the death of a family member or friend.
You should also review your accounts and life insurance policies to ensure that you are naming the right beneficiaries. Some accounts and life insurance policies have specific rules about who can be designated as a beneficiary, and some require that the beneficiary be irrevocable.