You’d be surprised that most people don’t have an official will, which can be problematic if tragedy strikes. Your assets may not end up to the people you’d like to have them, and if you become incapacitated but are still alive, the choices made regarding your medical care may not be those you’d like. Estate planning can save you from all of these scenarios.
Everyone should consider estate planning, even those with not a lot of assets. Here are estate planning essentials you need to take care of beforehand.
Have a Will Professionally Drafted
Over half of American adults don’t have a will, which is a big mistake. Even if you don’t have massive real estate properties, someone will need to handle your finances when you pass on, and it’ll be easier for everyone involved if there’s an official document spelling things out. It’s best to write your will with a capable estate planning attorney to ensure that everything goes the way you’d like to after you pass on or become incapacitated.
Ask a Lawyer About Trusts
If you draft a living trust, your estate may bypass probate alongside its associated costs and hassles. However, you’ll only likely need one if your property is worth over $2 million, have several properties in different states, or wish to keep the terms of your estate private. Otherwise, you’ll need to create a “trust” in your will to manage your assets after you pass on or become incapacitated. You need to ask a lawyer about keeping your estate in a trust.
It’s best to establish a “trust” if you fit into at least one of these categories:
- You have young kids but don’t want to leave the property directly to them.
- You have adult children but don’t want them to inherit your assets.
- You want to protect your valuables from ending up in the wrong hands.
Assign a Capable Power of Attorney
Drafting a power of attorney or POA is crucial in estate planning since they’ll be the ones in charge of your assets when you’re unable to do so. If you don’t have a POA, the court will be the one deciding what happens to everything you’ve worked so hard for, and they may come up with decisions you won’t like.
Drafting a POA can give your designated agent the right to transact real estate, change financial transactions, and other legal decisions as if they were you. However, keep in mind that this kind of POA is “revocable” at the time of their choosing.
Designated Your Beneficiaries
You can pass several of your possessions to heirs without indicating them in your will, such as your retirement plans. That’s why you need to maintain a “main” beneficiary and a contingent one. Your insurance plans should contain these two since they pass outside of a will. If you don’t designate a beneficiary, or the beneficiary is deceased or incapable of serving, the court will be in charge of deciding the fate of your assets.
Court decisions aren’t always the best. So, make sure to name your beneficiaries and regularly update them to avoid issues in the future and ensure your wealth is in good hands. However, keep in mind that beneficiaries need to be 21 years old or older and mentally competent.
Set Aside Enough Life Insurance
If you have kids depending on you financially, you’ll need to have life insurance that can cover lost income when you pass on. Although the insurance provider you choose is up to you, a good rule of thumb to consider is that it’s best to have enough life insurance equal to ten times your yearly salary.
However, if you’re interested in permanent life insurances like variable or universal with a savings component, consult with a financial planner to develop the right coverage for you.
Designate Guardianship
Although wills and trusts incorporate this aspect, some don’t. If that’s the case, picking up a guardian is crucial, especially if you have young children or are considering having kids. It can be a relative, close friend, or acquaintances. Just ensure the individual or couple is capable of taking care of your child, shares your views, financially capable, and is willing to raise kids.
However, like with all designations, having a backup or contingent guardian is ideal. If you don’t include these destinations, the court may rule that your kids live with someone you wouldn’t have chosen, or worse, mandate them to become wards of the state.
There’s more to estate planning than merely deciding how to split up your assets when you pass on.It’s about making sure that everything you’ve worked hard for falls in the right hand upon your temporary or permanent incapacity. Preparing any of the things mentioned can be a great place to start, but remember, it’s only the beginning.a
