It is a common misconception that estate planning is something only the rich need to worry about. But failing to have an estate plan can make an already difficult time even more stressful for your family. To ensure all your assets are transferred seamlessly to your loved ones when you die you need to know the most important estate planning documents.
Estate Planning Documents
Estate planning involves more than just drafting a will, there are a number of important estate planning documents you need to be aware of. Here is our guide to the five most important documents you will need to prepare when estate planning.
1. Will and Trust
A will or trust is the main component of every state plan. This is true even if you do not have significant assets. Will ensure your property is distributed according to your wishes. A trust can help to limited estate taxes and legal challenges.
However, simply having a will and trust is not enough. The documents need to be drafted correctly according to state laws. These documents also need to be drafted in a manner consistent with the way you have bequeathed assets outside of the will. Failing to do so will lead to contests.
2. Power of Attorney
Drafting a power of attorney is essential. This allows an agent you assign to act on your behalf if you are unable to do so. Without a power of attorney, a court may be left to decide what happens to your assets if you are incapacitated.
This document allows your agent to transact real estate, enter financial transactions, and make other health and legal decisions as if they were you. The conditions for the power of attorney can be specified and the power can be revoked at any time so long as you are mentally competent.
Often our spouses are the logical choice for power of attorney rights, however, it is also common for other family members, children, and siblings, to be assigned power of attorney.
3. Beneficiary Designations
Some of your possessions can be passed to your family without being included in a will. Insurance plans and your 401k, for example, will require you to identify beneficiaries. If you do not identify beneficiaries, or you do not update them when required a court may decide how to disburse any assets held within these accounts.
4. Letter of Intent
A letter of intent is a document you leave to the executor of your estate with specific instructions. These instructions can relate to specific assets, your funeral plans, or other special requests.
A letter of intent is not necessarily a valid legal document, it informs your executor of your intentions and importantly informs a judge of your intentions if they are required to intervene in the disbursement of your assets.
5. Guardianship Designations
If you have children who are minors or dependants it is very important to identify a guardian. This is often overlooked because young families do not expect not to be around for their kids, but ensuring your children are looked after is essential.
Make sure the couple or individual you choose is genuinely willing to raise your kids. It is also wise to include a backup or contingent guardian as well. Without these designations, a court could rule that your children live with a family member you would not have chosen, or be entrusted to the state.
Thinking about what happens when we pass away is never pleasant, but it should not be avoided. Good estate planning makes a difficult time for your loved ones slightly less challenging. Following our guide will ensure you know and use the most important estate planning documents. To ensure you have the right estate plan get in touch with us at Crosson & Richetti.