No matter how much you are worth, it is important to have an estate plan in place to protect yourself, your loved ones and your assets. An effective estate plan is one of the best things you can do for your family to ensure you pass on as much as possible, on your own terms, to prevent any potential family conflicts. Here are five important documents you should have for your estate plan.
1) Will. A will dictates where your assets go when you pass away. It also determines the guardians if your dependents are underage and an executor to distribute your assets. Dying without a will can be costly since state law will determine how your assets will be distributed.
2) Power of Attorney. This document designates a person to act on your behalf on financial, legal or any other affairs. You can give this person limited or broad decision-making authority. This person must be chosen very carefully. A traditional power of attorney terminates upon your disability or death. A durable power of attorney will continue during incapacity or disability and terminates upon your death.
3) Health Care Proxy. This document gives someone you designate the authority to make medical decisions if you become incapacitated. It also gives the option to list specific health care wishes. This can prevent family conflicts or court intervention if you are unable to make your own health care decisions.
4) Living Will. This document allows you to leave written instructions that explain your health care wishes, especially about end-of-life care or terminal illnesses. It does not give anyone the authority to speak for you, but expresses what you want.
5) Trusts. A trust is a contract and arrangement where designated people manage assets that have been transferred into the trust for beneficiaries. Some of the benefits of setting up a trust are to eliminate or reduce estate taxes, avoid probate and probate costs (court procedures), and protect assets for the beneficiaries. There are several types of trusts. A living trust is one that is created during your lifetime. A revocable living trust is one often used in estate plans that allow any provisions to be changed at anytime during your life. The trust is managed during your lifetime (even if you are incapacitated), at your death, and even for future generations. For more information on trusts, contact a professional.
While these documents address most estate planning issues, there may be more to your estate plan based on your situation. For each of these documents, you can go online to create them. For those who have more-complicated situations or assets, it may be beneficial to contact a professional to make sure it meets all legal requirements and make sure you addressed all potential issues. You should review these documents on a regular basis, especially with significant changes such as births, deaths, divorces, etc. The important thing is to always be prepared!