If you have possessions, assets, or properties, then you have an “estate” and you need estate planning.
You may have heard the word “estate” and thought of mansions and large properties; however, you do not need to be rich to have an estate. An estate contains all the residential or commercial property a person has accumulated during their lifetime. This includes real property, cars and trucks, cash, jewelry and a multitude of other assets.
Anyone that wants their possessions to be transferred to loved ones after they pass away should think about developing an official estate plan. If someday in the future you’re not able to speak for yourself, your estate plan and its vital set of supporting documents will do the talking for you. This very important planning step makes life easier and far less complicated for your family and heirs as well as to ensure that your final wishes are carried out.
What is an Estate Plan?
An estate plan is a collection of documents that protect your assets, and also personal effects (your “estate”) and explains precisely how you intend to pass them down. It records your desires and also specifies specifically who will protect those wishes and also act on them in your absence.
What Does an Estate Plan Include?
- Durable power of attorney
- Living Will
- Beneficiary designations
- Healthcare power of attorney
- Guardianship designations
Wills and Trusts
A will or trust should be the main foundation of every estate plan, even if your estate is small. Wills ensure property is distributed according to an individual’s wishes. Some trusts help limit estate taxes or legal challenges. However, simply having a will or trust isn’t enough. The wording of the document is important and should be consistent with the way you’ve bequeathed the assets that pass outside of the will.
Durable Power of Attorney
It’s important to draft a durable power of attorney (POA), so an agent or a person you assign can act on your behalf when you are unable to do so yourself. Without a power of attorney, it may be necessary for your loved one’s to seek court orders in order to conduct your business affairs.
This document can give your agent the power to transact real estate transfers, enter into financial transactions, and make other legal decisions as if they were you. This type of POA is revocable by the principal at a time of their choosing, typically a time when the principal is deemed to be physically able, or mentally competent, or upon death.
A living will is your end of life directive to your care giver. It indicates your wishes regarding life prolonging efforts to be made once two Doctors have declared your condition as terminal and irreversible.
As noted earlier, a number of your possessions can pass to your heirs without being dictated in the will for example IRA or 401K assets. This is why it is important to maintain a beneficiary—and a contingent beneficiary—on such accounts. Insurance policys should contain a beneficiary and a contingent beneficiary as well because they may also pass outside of a will.
If you don’t name a beneficiary, or if the beneficiary is deceased, a court could be left to decide the fate of your funds. A judge who is unaware of your situation, beliefs, or intent is unlikely to make the same decision you would have made.
Healthcare Power of Attorney
A healthcare power of attorney designates another individual to make important healthcare decisions on your behalf in the event of incapacity. You should pick someone you trust, who shares your views, and who would likely recommend a course of action with which you agree. Finally, a backup person should also be named, in case your initial pick is unavailable or unable to act at the time needed.
While many wills or trusts incorporate this clause, some don’t. If you have minor children or are considering having children, picking a guardian is incredibly important and sometimes overlooked. Make sure the individual or couple you choose shares your views, is financially sound, and is genuinely willing to raise children. As with all designations, a backup or contingent guardian should be named as well.
Absent these designations; a court could rule that your children live with a family member you wouldn’t have selected. And in extreme cases, the court could mandate that your children become wards of the state.
What Are some of the Crucial Features of an Estate Plan?
- Protects your possessions for your family members (or other beneficiaries).
- It offers you a say in who obtains your belongings.
- Permits you to choose who makes your decisions.
How to Start Your Estate Planning Process.
Inventory your possessions
You may think you don’t have enough to justify estate planning, but once you start looking around, you might be surprised by all the tangible and intangible assets you have.
Establish your family’s needs
Once you have a sense of what’s in your estate, think about how to protect the assets and your family after you’re gone.
Create your directives
A complete estate plan includes important legal directives.
Review your beneficiaries
Your will and other documents should spell out your wishes, but always continue to review and confirm your beneficiary selection.
Review your state’s estate tax laws
Estate planning is often a way to minimize estate and inheritance taxes.
Weigh the value of professional help
If your estate is large and or complex, then you should definitely work with a professional
Plan to revisit your estate plan regularly
Life changes so be prepared to make changes to your estate plan as needed.
- Revisit your estate plan when your circumstances change.
- Revisit your estate plan periodically even if your circumstances don’t change.
Talk to us at TTG Financial to learn more information regarding estate planning and how it might work for you.