Did you know that only 18% of Americans above 55 years have the right legacy plan essentials?
Contrary to common belief, estate planning goes beyond having a will. It would be best if you had a durable power of attorney and a healthcare directive. These essentials will ensure that your wishes will be granted upon your demise.
Estate planning isn’t a reserve for the tycoons. If you’re above 18 years, you’re a potential candidate for estate planning.
So, what should you have in your estate plan? Here is a guide on estate planning 101 that will give you adequate headway as you consider your planning your estate.
1. Durable Power of Attorney
A durable power of attorney is an indispensable part of real estate planning. A power of attorney ensures that you have an agent who will make decisions when incapacitated through illness or death.
Without a power of attorney, the court has the mandate to decide how to handle your assets, which might not be how you’d have wished to have your assets distributed.
The durable power of attorney is a real estate planning document that gives your agent the authority to make financial transactions, legal, and real estate decisions as if they were you.
The POA can be on a single person who will handle everything. You can also designate the POA to different individuals for various situations.
It would be best to designate trusted persons such as your older children, spouse, or siblings to be the power of attorney. Ensure that your ideal choice is a money-savvy individual who will follow your wishes to the letter. More importantly, consider backup POA as your first choice might be unwilling or unable to act.
2. Wills or Trusts
If you are part of the 68% of the Americans without a will, you’re missing one of the most crucial estates planning documents.
A will indicates how you’d want your property to be divided once you die. It further includes the appointment of a guardian, who will look after your minor children and other dependents, including pets.
Trusts almost play the same role as a will. However, a trust is somehow private as it doesn’t go through the court proceeding before it’s executed. A will goes through probate, making it a public record.
Trusts and wills need to be consistent in how you have bequeathed the assets outside your will. For instance, naming one beneficiary on an insurance policy that is out of the will and bequeathing the same to a second person in the will can prompt a will contest. Your will and trust shouldn’t be a cause of family conflict.
3. Letter of Intent
In estate planning 101, a letter of intent is among the most crucial things you can’t afford to ignore.
A letter of intent refers to a letter that you leave to your will’s executor to provide an overview of your wishes on the distribution of your assets after you die. The letter of intent also has relevant details that you’d want to be relayed during your funeral.
It would be essential to note that a letter of intent is necessary, but it’s not legally binding. As such, it shouldn’t replace a trust or a will. If anything, the letter of intent adds a personal touch to the whole process as you’ll have written it.
In a letter of intent, you’re not limited to what to include. Besides logistical wishes on asset division, you can write other emotional issues that you wish to communicate to your loved ones. You might want to emphasize the values you want them to have even after your demise.
4. Beneficiary Designations
Several of your assets can pass to your dependents, even if they are not indicated on the will. It would be best to have beneficiary designations, especially on assets that aren’t on the will. For instance, your insurance plans need a beneficiary and a contingent beneficiary since they will pass outside your will.
When planning your collection and other tangible assets, consider all your financial accounts. You need to have your beneficiary designations always updated. In case of a beneficiary’s death, remarriage, or divorce, update the designations as necessary.
You can have more than one name as beneficiaries depending on how you want to split your assets. The good thing about non-retirement accounts is that you’ll only name the person you wish to inherit the money on the transfer of death form.
A beneficiary designation is among the estate planning 101 people often forget as the financial accounts involved aren’t within a will.
5. A Living Will
When planning an estate, a living will should be a priority. A living will refer to a legal document that communicates to others what you’d prefer about end-of-life treatment. It outlines the medication procedures you would want if you’re incapacitated to the point that you can’t communicate.
A living will is different from the typical last will. The former is enacted when you’re still alive but in a terminal state or unconscious and unable to voice your medical wishes. The thought of a living will is chilling, yet it is considered crucial.
In your living will, you need to reflect on some medical scenarios;
What are your thoughts on donating some of your body organs after you die?
What are the pain management procedures or drugs you’re comfortable with?
Would you be comfortable with feeding tubes if incapacitated?
Are you pro ‘Do Not Intubate’ or ‘Do Not Resuscitate?’
What would you prefer if you can’t breathe independently?
Answering some of these questions will help establish a living will. A living will and the healthcare power of attorney are essential estates planning documents that will ease family conflicts over your care if you become critically ill.
Estate Planning 101 Gives You an Ideal Headway When Planning an Estate
The right estate planning guide is vital for anyone conscious about the future of their family. Planning an estate goes beyond deciding on property division upon your demise. Estate planning 101 delves deeper into estate planning documentation and the necessary preparation before you die.
Our blog focuses on personal finance. Explore further for practical tips and money advice for your small business or personal finances.