6 Things You Should Have for Effective Estate Planning

Estate planning is not just about protecting your assets and who gets them when they die. Everyone over their lifetime will acquire assets such as a home, vehicles, jewelry, tools, and other valuables. When they die, without the proper planning and documents, and even if they have a will, their assets could go where they do not want or be eaten up in the probate process.

Estate planning also involves the unpleasant aspect of becoming incapacitated physically or mentally and being unable to manage assets. It does not have to be terribly expensive to put an effective estate plan in effect, and here is what you needi.

1. Implement Wills and Trusts – Wills and trusts are two different instruments, but they come together to ensure that assets are distributed to heirs according to the individual’s wishes. The will does this by setting out who gets what. A trust works with the will to reduce taxation and possibly to avoid legal challenges.

This is not expensive, but it can get a little complicated when it comes to the many different assets you have, from property to insurance policies and investments. It is important to avoid conflicts by forgetting you have a relative named as a beneficiary of an insurance policy and then trying to bequeath it differently in another document.

2. Beneficiary Designations – It is quite important to carefully set out beneficiaries and contingent beneficiaries for insurance, some bank accounts, and some investments. If these accounts and policies have a place to designate a beneficiary, they will pass outside of the will and probate. Having a contingent beneficiary can solve a problem is a primary beneficiary is no longer alive.

3. Durable Power of Attorney – Should you become incapacitated or in some way unable to manage your finances and assets, you will want a durable power of attorney set up that appoints someone to do these things for you. This power of attorney can allow the agent the power to conduct real estate transactions, make legal decisions, and enter into other transactions on behalf of the individual.

4. Letter of Intent – You can never plan what a judge may do or an executor when it comes to your wishes. Even though you have a will, there can be misunderstandings or vagueness in some areas that can cause problems in the probate process. The letter of intent is simply a letter that sets out your wishes for specified assets, funeral details, or other decisions. It is not truly a legal document, but it can clarify ambiguities in your will or other documents.

5. Designate Guardianship – Do not count on guardianship for existing or future minor children to be handled properly in other documents. Determine who you want to have guardianship of your minor children, make sure they agree with what you want from them, and set everything out in a document. Also set out a contingent guardian.

6. Healthcare Power of Attorney – The HCPA, Healthcare Power of Attorney, has the sole purpose of setting out who you want to make healthcare decisions for you if you become incapacitated. Take care to discuss your wishes with the person you want to give this power to make sure you are on the same page with your wishes.

This list of six actions/documents is not terribly expensive to put into effect, and no matter your financial status, consider getting into putting them in place. Consult with experts who do this for others.

i Estate Planning Basics, Investopedia.com


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