When you hear the word “estate,” your mind may automatically think of sprawling grounds and mansions. However, you don’t have to be extremely wealthy to have an estate or need estate planning.
Estates consist of all the property you own. This includes cash, real estate, vehicles, and other assets. If you want to ensure your assets are transferred to your surviving loved ones after you die, having a formal estate plan is a must.
Keep reading to learn more about estate plans, why you need them, and what they offer.
An Overview of Estate Planning
Your estate plan outlines how your assets will be managed and distributed after you die. It also designates the person who will be responsible for managing your financial obligations and properties if you become incapacitated at any time.
Some of the assets included in estate plans, according to experts like http://waymanandlong.co.uk/new-services/estate-planning-probate/, include:
- Life insurance
- Houses and real estate
Everyone has their own reasons to invest in estate planning. Some of the most common include preserving family wealth or providing for surviving children.
Essential Documents in an Estate Plan
An estate plan is comprised of several documents. Each one is important, and together, they provide legal security that your assets will be handled based on your wishes.
The will is a legal document that is created to provide instructions on handling important aspects of your life after your death. The main components of a will include your property and custody of minor children.
In the will, you make your wishes known. You will also designate a trustee or executor. This is the person who is responsible for ensuring your outlined wishes are done.
The will also stipulates if a trust should be created after you die.
The guardianship document will outline what you want to happen to and who you want to care for your children or another dependent after you die. It is also used in cases where you are incapacitated.
Usually, the guardianship instructions are included in your will (as mentioned above).
A trust is a legal fiduciary agreement that involves three parties.
- Party 1: The Settlor, Grantor, or Trustor
- Party 2: The Trustee
- Party 3: The Beneficiary
The Settlor is the person who is establishing the trust. The Trustee has the right to hold property and assets for the benefit of the Beneficiary. This is the person who eventually receives the contents of the trust.
Financial Power of Attorney (POA)
If you are incapacitated, a Financial POA has the right to take over your finances and handle things on your behalf. This person is given this power after you die, as well.
The POA is the document that designates who this person is.
Durable Power of Attorney (POA)
Considered a variation of the Financial POA, this document provides someone else with legal rights to handle non-medical or non-health affairs. The word “durable” just means that if you are incapacitated, the POA goes into effect.
Advance Healthcare Directive (AHCD)
The AHCD is often called a Medical Power of Attorney or Living Will. With this document, you designate what medical actions should be taken if you become incapacitated and unable to make decisions.
Why You Need an Estate Plan
Understanding what is included in an average estate plan is important. However, you may also want to know why this is something you need.
Some of the reasons that you should make an estate plan now, regardless of your age or wealth, include:
Gives You Say in Who Receives Your Assets
When you have an estate plan, you can feel confident that your assets will go to the people you choose. Once you pass away, the executor will ensure that the named beneficiaries receive your assets.
Protects Your Assets
Creating an estate plan is essentially providing you and your heirs with a safety net. It will help preserve the current value of your assets.
Also, having an estate plan reduces the time your heirs have to wait for your assets to transfer to them. This also ensures that the legacy you want to leave is carried out based on your instructions and terms.
Lets You Choose Who Will Make Decisions on Your Behalf
Most estate plans include the durable power of attorney and a healthcare proxy. These are two legal documents that help ensure your plan is executed how you want it to be.
With a durable power of attorney, you appoint a family member or friend to manage your financial situation if you cannot do so. The healthcare proxy gives someone the right to make health-related decisions on your behalf.
These forms provide peace of mind that even if you cannot manage or make decisions on your own, your wishes will still be carried out.
Now Is the Time to Begin the Estate Planning Process
It doesn’t matter how old you are or how few assets you have; creating an estate plan is a smart move. If you need help with estate planning, there are plenty of professional services available.
Be sure to research the options to find an estate planner who has dealt with situations similar to yours in the past. This will help ensure your estate plan meets your needs.
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