A comprehensive estate plan extends beyond just distributing assets. Whether you’re just starting to think about estate planning or looking to update an existing plan, understanding key estate planning resources is essential.
Estate planning can often seem daunting, but breaking it down into these components can make it easier. Each element plays a specific role in securing one’s legacy and protecting an individual’s interests.
A will
A will is the cornerstone of any estate plan. It’s a legal document that outlines how your assets will be distributed after your death. A will also allows you to appoint someone who will manage the distribution of your assets. It should only address assets not named in other estate planning components.
Trusts
Trusts are versatile estate planning tools that can help manage your assets during your lifetime and after. They offer various benefits, such as avoiding probate, reducing estate taxes and protecting assets for specific purposes or beneficiaries. There are different types of trusts to consider. These have specific purposes and protections, so discussing your goals before committing to a particular strategy is wise.
Power of attorney
A power of attorney is a legal document that grants someone else the authority to make decisions on your behalf if you become incapacitated. This can cover financial matters, healthcare decisions or both, depending on how it’s structured. A power of attorney expires upon your death or under other conditions outlined in the document granting such authority.
Advanced directives
Advanced directives, including living wills and healthcare proxies, specify your wishes about medical treatment if you’re unable to make these decisions yourself. There are limits for what this document can do, so you should give someone who you trust medical power of attorney in addition because they can step in to make any decisions not covered by an advanced directive.
Letter of instruction
A letter of instruction is an informal document that provides additional information and guidance to your loved ones and executor. It’s read prior to the will, so it can include details on funeral arrangements, the location of important documents or explanations of your decisions. While this isn’t a legal document, it can be valuable after your death.
Creating a comprehensive estate plan requires careful consideration of your unique circumstances and goals. Seeking legal guidance to map out the most effective strategy for your needs is a good way to get started with this process.