Thinking about the future can get you anxious, but things become so much clearer when you have a plan.
While estate planning is an excellent way to secure your loved ones’ financial future, there are things you need to include to ensure you have a well-rounded plan. Anything can happen at any time, even incapacity, and you want to be sure your loved ones are not confused about your wishes. For example, the kind of care you’d want, who becomes responsible for that care, and how you’d like your financial affairs to be managed.
Such considerations are essential for a comprehensive estate plan. And notably, there are certain documents or provisions you can use to address each of these considerations.
So what are these essential documents you should include in your estate plan?
A will is a fundamental estate planning tool. It makes up the most of your estate plan as it addresses the distribution of your assets when you pass away. Essentially, a will is how you ensure your loved ones are taken care of when you die.
Creating a will can seem daunting, especially when you feel you have very few or too many assets to pass on. Regardless of how much you have, even if it’s just a house and a bank account, everyone needs a will to specify who receives what. If not, the court will decide for you, and that child that deserves the most of your estate would no longer be the one to receive it.
If you’re not sure how best to draft your will, it’s a great idea to hire an estate planning attorney near you. You can discuss your needs with your attorney by telling them about your assets, family structure, and how you’d prefer your assets distributed amongst them.
However, you may feel uncomfortable hiring a lawyer and discussing very personal issues with them. Hiring one also comes at a cost for something as basic as a will. Alternatively, you can get a free online will template and use it to structure yours. An online will template is a sample that will help you design your own will as if it were done by a professional. When you go through such templates, they give you an idea of how to divide your property, what terms to use, and the legal requirements for writing a will.
Ultimately, you’d be saving cost. So you can get online will templates today and start planning towards the care of your dear ones when you pass away.
A power of attorney is an invaluable tool during incapacity.
Incapacity is a situation whereby an individual becomes incapable of making reliable decisions regarding their own affairs. It may be due to severe illness, dementia, or any other disease that renders one unable to handle things. With a financial power of attorney, you can appoint someone (known as an attorney-in-fact) to manage your finances when you become incapacitated.
Everyone will die, so everyone needs a will. But not everyone will one day become incapacitated. However, since no one knows what will happen later, it’s good you have a plan should you find yourself in such a situation. Whoever you appoint as your agent will make decisions on your behalf regarding your business, transactions, investments, bill payment, etc., always prioritizing your best interests.
Importantly, you lose your ability to create a power of attorney the moment you become incapacitated. Hence, the best time to plan is now that you’re well.
Also, note that if you do not have a power of attorney document when you become incapacitated, a more expensive and time-consuming guardianship process will be conducted to provide you a caregiver. This process can be quite a hassle for your family.
Just like the financial power of attorney, you use the healthcare power of attorney to appoint an agent to make medical decisions on your behalf in the event you become incapacitated. When you create one, you’ll be ridding your family of conflict of opinions regarding what kind of healthcare you’d want. That’s because you now have just one trusted person who’d be responsible for making such decisions.
This document only comes in handy during end-of-life situations. On your living will, you could write down your healthcare choices for a case where your survival chances are almost zero. Perhaps, you wouldn’t want to be kept on life support for too long because of the cost. Or maybe you’d like to help with organ donation. You can make such decisions on your advance directive.
Notably, every will must go through probate, a court process where the document gets validated, your debts and taxes paid, and properties distributed. If you have a large estate with debts and complex assets, the process can be a hassle for your loved ones.
Conversely, there will be no probate if you transfer your assets using a living trust.
The assets will pass directly to your heirs quickly and efficiently. However, only use this if the benefits outweigh the cost. Creating a trust is expensive, and you’ll need to hire a lawyer. So if your estate isn’t complicated, a simple will is optimal.
Some assets will typically pass outside your will. If you go through free online will templates, you’ll notice you can’t find assets like 401(k), life insurance, and transfer-on-death bank accounts. That’s because these assets are specially designed to pass outside a will and probate.
Hence, you have to designate beneficiaries for each of these assets so that they will pass directly to the individuals when you pass away. Designating a child or spouse as the beneficiary of your life insurance is a great way to provide for them when you’re no longer around.
Your children cannot inherit property if they’re below 18 at the time of your passing away. The only way to ensure they get the kind of care you’d want is to assign a guardian for them.
You can easily do this by naming the guardian in your will. In the event of your death, the guardian will manage whatever assets you leave for the kids on their behalf. They will later be able to inherit whatever is left when they turn 18.
Including the above in your estate plan gives you peace of mind for the future, knowing that your loved ones will get the support they need when you’re gone. It also assures you that your affairs will be in competent hands when something happens to you.
However, it is important to notify whoever you appoint as a will executor, guardian, or attorney-in-fact in advance. This notification will help prepare them for their duties. It wouldn’t be nice if such responsibilities take them by surprise while they’re mourning your loss.