Making arrangements for your finances and assets in the event of your incapacitation or death is an essential task to ensure that your estate is handled per your wishes. Preparing the necessary documents in advance gives you full control over the decision-making process and prevents the burden from falling on your loved ones.
You may already understand the importance of having a legal will to distribute your assets after you die, but did you know there is much more to estate planning? A comprehensive plan should also include arrangements for your medical care, guardianship, and power of attorney. Follow this guide to learn more.
Benefits of Essential Estate Planning Documents
It’s never too early to have an estate plan in place. Taking action can give you peace of mind, especially if you have children or other dependents who rely on you for physical or financial support. Suppose you die or become incapacitated without an estate plan. In that case, the courts control the distribution of your estate, which can take significantly longer and puts your affairs in the public eye.
Wills
Creating a will is a minimum requirement for estate planning. Your will is defined as a legally binding document that names an executor to oversee your estate and ensure that your wishes are carried out and your assets distributed appropriately. You can also name guardians for your minor children.
Guardianship
If you have young children, take care when naming guardians to raise them in the event of your death. Make sure they are the best candidates and not just the most convenient. Always discuss your intentions to get their consent before making it official. Ensure you have enough life insurance or other assets to provide financial support to the guardians to raise your children.
Revocable Trust
A revocable trust, also called a living trust, is becoming a popular estate planning document. During your lifetime, you retain full control over the named assets and can update and amend the terms whenever you like. Following your death, the successor trustee named by you in the document takes over the assets in the trust. This is a good way to avoid lengthy probate courts.
Financial Power of Attorney
Naming a financial power of attorney is an important step in estate planning. If you become seriously ill or are otherwise unable to make decisions for yourself, the person or persons you name will act on your behalf. A financial power of attorney can pay bills and sign financial documents for you.
Medical Power of Attorney and Health Care Directives
Advance care planning is another critical part of your estate. Name a healthcare power of attorney to make healthcare decisions if you get sick, get into an accident, or require surgery. Your healthcare power of attorney can speak with your doctors about your medical condition and obtain documents and information about your health.
Along with a medical power of attorney, you should fill out a health care directive or Living Will. This document allows you to make advanced decisions regarding pain management, life-sustaining interventions, and organ donation. Your doctors and power of attorney must follow the directives you indicate in your living will.
Life Insurance and Retirement
Your life insurance policies and retirement accounts aren’t part of your trust or will. Instead, you need to keep each account updated with the beneficiary you want to receive the benefits of the account upon your death. It’s crucial to make changes to your beneficiary designations if you experience important life events like a marriage, the birth of a child, or divorce.
Tips for Thorough Estate Planning
You must have a plan in place to ensure your affairs are managed correctly and your assets are transferred to the intended recipient. Some helpful ways to keep track of all the steps include:
- Itemize your physical assets: Make a list of all your valuable items. Include photographs, if possible, along with the name of the person you wish to leave the item to.
- List your financial assets: Include a list of all your bank accounts, insurance policies, and other accounts with the contact information and account number.
- Include your debts: You also need to make a list of your debts and obligations like mortgages, credit cards, and auto loans for your estate to pay off. Attach the account numbers or a recent statement.
- Complete transfer on death authorizations: Set up a TOD for your assets like bank accounts to avoid probate and transfer them directly to the beneficiary.
Estate planning can seem complicated, so you may want to work with knowledgeable professionals like a lawyer, financial planner, accountant, or other advisor to help you through the process and ensure you have all the necessary documents filled out and filed correctly.
Make sure you speak with your intended trustee, executor, and named guardians to discuss the terms of your estate and the role you want them to have to get their consent. Once you have your plan completed, share it with your spouse and another trusted individual so they know where to find the documents when needed. Remember to review every part of your estate plan regularly so you can make any necessary changes to reflect your current wishes.
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