You may have heard the phrase and thought it was bogus. You’ve moved on with your life, but the fact remains; estate planning is for everybody. The end goal for an estate plan is to your assets and property from the courts and make sure they end up in the right hands. Without an estate plan, the assets you do have will enter probate and be distributed to your beneficiaries by the court. A plan allows that decision to be yours.
The essentials of a proper estate plan include a will/trust, a power of attorney (POA), a healthcare proxy, guardianship designations, and beneficiary designations.
1. Will/Trust
Make sure your estate plan has a will or a trust. A will ensures your property, however grand or minor, is distributed to match your intent, and a trust can help limit estate taxes. There are many differences when comparing wills and trusts, which can be suited to your unique situation by a licensed estate planning attorney. Be sure not to assign a certain asset to two different beneficiaries as this action could lead to a will contest.
2. Power of attorney
A durable power of attorney is a document that allows you to assign an individual to act on your behalf if you become mentally incapable of doing so. Without a POA, the decisions of how to divide your assets may be up to the court.
Who you choose as your power of attorney assumes every legal right you once had in the way of your finances, real estate transactions and other legal decisions. Some estate plans state that if you once again became mentally or physically able to make these decisions, you could have your POA revoked.
3. Healthcare proxy
A healthcare proxy, or healthcare power of attorney, is the individual you choose to make healthcare decisions on your behalf if you become physically or mentally unable to do so. This can be a tough decision. Be sure to pick someone who aligns with your views and, more importantly, someone who has your health in their best interests.
4. Guardianship and beneficiary designations
A guardianship designation is a document that allows you the opportunity to assign a legal guardian for your minor-aged children in the event of incapacitation. For the betterment of your children, consider choosing an individual or couple who you share a close connection with, shares your values, are financially capable of caring for children and have your children’s best interests at heart.
Concerning beneficiary designations, some assets, like 401(k) funds, can be passed on without being cited in your will. Make sure to assign a primary and contingent beneficiary. The contingent beneficiary will obtain the assets if the principal heir cannot or will not accept them. These selected heirs must be mentally competent and over the age of 21.
The assets that can be handed down without the dictation of a will differs by state. A knowledgeable estate planning attorney can help guide you toward the estate planning decision to best suit your needs.
