Having the right documents in place can help lift the burden on your loved ones after your passing. It can help reduce family squabbles and eliminate litigation. And while you’re alive, it can protect you in case an illness or injury incapacitates you.
These are all unpleasant scenarios to think about, but an estate plan can give you peace of mind that you have taken care of the financial well-being of you and your loved ones.
Here are some documents you should consider:
Last Will and Testament or Revocable Living Trust
A will contains your instructions for how your property should be distributed to your heirs. A court process called probate will help ensure that your wishes are carried out.
A revocable living trust also details your wishes—but with a difference. It allows your loved ones to avoid the time-consuming and public process of probate.
You control your trust while you are alive and can make changes to it as you like. You can also use what is called a pour-over will to handle the assets that you are unable to place in the trust.
Many people use living trusts for tax savings—you should talk to your tax advisor or financial planner to see if it would benefit you.
Financial Power of Attorney
You can use a financial power of attorney to give someone the authority to manage your finances. A durable power of attorney takes effect immediately. It can be used, for example, so your spouse can make changes to financial accounts that are held in your name only.
A springing power of attorney would take effect if you become incapacitated. It can help you avoid having the courts decide who should manage your finances in your stead. You would want to name someone you trust to handle your assets responsibly and with your well-being in mind.
A living will, or advance directive, spells out the medical care you would want should you become unable to make those kinds of decisions.
Among the instructions you can leave are whether you would want to be kept on life support if you become permanently unconscious.
Along with your living will, you can draft a power of attorney for health care. It works similarly to a financial POA, except your designee will make medical decisions on your behalf.
People procrastinate with estate planning for a lot of reasons. Some think they’re too young, others don’t think they have enough assets to formalize a legacy, and others are just plain busy.
But we all have property, and we all have wishes about who should receive that property. Don’t think of property as just your bank accounts and real estate. It can mean personal items, like your high school yearbooks or the quilt your grandmother made you. It can also mean your digital assets, like your Facebook account.
Making a plan can provide comfort—both for you now and your heirs later. We believe that this alone makes the effort of an estate plan worth every single step.