Creating your estate now helps you to feel more secure since you know that you’ve done what you can to help provide for your loved ones after you pass away. Many people don’t take the time to create this plan because they think it is going to take too long or that it is pointless. No matter what your financial state is right now, an estate plan is important.
There are several components of an estate plan that you should consider as you are developing it. These all work together to let those who are close to you know exactly what you want to happen.
Will: Your will outlines where specific assets will go. These must not be governed by other documents, such as a payable on death designation that is common with financial accounts or trusts. Be sure to include a plan for your digital assets when you write out your will.
Trusts: These estate planning tools enable you to transfer assets to the beneficiaries without having to go through the probate process. There are many types of trusts, each of which have a specific purpose. You must consider your goal for each transfer to ensure you put the assets in a trust that will help you realize your wishes.
Powers of attorney: There are times when people become incapacitated and can’t make decisions on their own. Setting up powers of attorney can help ensure your wishes are followed. You need someone to make decisions about your health care and someone to make them about your finances.
Living will or advance directives: These provide instructions for various aspects of medical care in case you can’t speak up for yourself. Your health care power of attorney will also have a say in these matters. Be sure to write out specific information about what you’re willing to accept for medical treatments and what you don’t want.
Letter of instruction: While this n’t officially part of the estate plan, it provides valuable information for the person who is placed over your estate. Leave information about where you have important documents like your will and life insurance policies. Additionally, leave the locations of financial accounts.
Once you have these done, don’t forget about them. You need to review them at least annually. Between these normal checks, you should also go over them if you have a major change in your circumstances. Marriage, divorce, birth of a child and similar situations might require a modification in the plan.