What are the components of a good estate plan? What does it looks like? What are those legal documents that a well-developed estate plan comes with? These are the questions you should ask yourself before hiring an estate planning attorney or creating an estate plan
Will
An estate plan without a will cannot be called an estate plan, as a will is the first document you’ll think of when preparing your estate plan. A will is basically a document that contains information regarding how you want your assets to be distributed and managed. It also contains the names of your estate beneficiaries, including the portion of your assets you want each individual to inherit.
If you have minor children, you can as well designate guardians for them in your will in case you and your spouse become incapacitated.
Trusts
Another component of a well-developed plan is a trust. Trusts are legal setups that hold assets on behalf of a beneficiary or beneficiaries. There are several types of trusts, and the individual setting up a trust can determine how and when beneficiaries receive the assets present in the trust. With a revocable trust- a trust where its terms can be altered or modified without the consent of the beneficiaries- you can escape the expensive and time-consuming probate process. Irrevocable trust, on the other hand, can help restrict exposure to estate taxes.
Durable Power of Attorney
As one gets older, there is a chance to suffer aging diseases such as dementia, Alzheimer’s, and the likes. Things like this makes one incompetent to make reliable decisions for themselves. It may also be due to a disability, accident, or sickness such that renders them unconscious. In such a situation the person is declared legally incapacitated. But such a person may need someone to make decisions on their behalf, such as in matters concerning their finances, business, or healthcare.
Healthcare directives
Healthcare directives are almost similar to a power of attorney. The main difference between power of attorney and healthcare directives is that, while the former handle your financial and legal decisions, the latter handles your medical decisions. There are two main documents in this category; a living will and a healthcare proxy.
A living will
A living will is a legal document that state how you wish to be cater to in the event of your incapacitation. A healthcare proxy, on the other hand, allows you to choose an individual who will make those important healthcare decisions on your behalf. If you feel that your family member may have different opinion regarding how you want to be catered to when incapacitated, it is best you have these documents in place to make sure that you wishes are adhered to.
Why is this Plan Important?
Estate Planning Prevents Unwanted inheritors
Like it or not, your state could have an already-drafted will for you. Or if you die intestate (without a will), your state will designate beneficiaries on your behalf. In several states, your assets will be shared based on the intestate law of the state. In that case, there is a possibility that your wealth could be transferred to unintended beneficiaries. An estate planning lawyer can easily fix this issue. He can make sure that your property goes to your intended inheritor’s hand.
It helps reduce estate tax
Federal estate taxes or state inheritance tax could slash your wealth significantly. It could be a terrible burden to your beneficiaries. You can reduce or in some cases eliminate estate taxes by creating a trust. In addition, you can as well adhere to some estate planning strategies to make the tax less significant with the assistance of a professional estate planning lawyer.
It protect young inheritors
The age difference between parents and children is often significant. Thus, there is a huge possibility that they may leave this world before their children. So, the best way to ensure that their children, especially minors, are well catered for after their death is to create a perfect estate plan.
As a parent, you know what is best for your children. You can designate a guardian for them in case you kick the bucket before they become adults. If you die without a will, the court would designate a guardian for your children who will cater to them as they deem fit.
Help prevent probate
A lot of beneficiaries and estate executors dislike the probate process and this is because it can be time-consuming, stressful, and very expensive. The probate process could take weeks, moths, or even years.
Probate is usually done to validate your will, estimate the value of your estate, settle any unpaid taxes and bills and share your remaining assets to the designated beneficiaries.
Contact us today
Do you need help in creating a well-developed plan? Don’t hesitate to contact our office. Our attorneys will be glad to help you create the best estate plan.
