No one likes to think about their own mortality, and therefore many people do not plan for how they want their estate to be distributed. That leaves their families and the courts to figure it out. An estate plan allows an individual to decide exactly who will benefit from their estate, and how those people will benefit.
An estate plan is a series of documents that direct how your estate should be distributed upon your death and incapacitation.
Estate planning is not “one size fits all.” The type of estate planning documents you need depends on your assets, your heirs, and your wishes. Estate plans can be changed during your lifetime, and should be re-evaluated and adjusted as your circumstances change. Estate plans can range from a simple one page will to multiple complex trusts.
What is a will?
A will is a document in which you can express your wishes as to how your property is to be distributed. In a will you nominate a person, the executor, to manage your estate until the distribution is final. To distribute an estate through a will, the will must be authenticated by the Court first, and the Court supervises the estate distribution. Then the named executor will work with the court to ensure that the assets are distributed. This process is called Probate.
What is probate?
Probate subjects your money to all of your creditors. The goal of estate planning is to avoid probate to save on the cost of the lawyers to administer the estate through the courts, and to prevent creditors from access to estate funds – saving it all for your heirs!
What is a trust?
Similar to a will, this document allows you to express how your estate is to be distributed, however it does not have to go through probate. There many different types of trusts, and the type of trust you need is determined by the assets you are wanting to distribute, who you want to distribute the assets to, and how and when you want them distributed.
What is power of attorney?
Unlike the above the documents, a Power of Attorney is effective while you are alive. A Power of Attorney authorizes a person of your choosing to act on your behalf. There are different types of Power of Attorney including medical, financial and general.
So, why do I need an estate plan?
There are many reasons that someone needs an estate plan. Most people want to be able to decide or have some control on how their estate is distributed after their death. This gives you and your loved ones peace of mind. By doing the work for them, your loved ones do not have to figure out how to distribute your estate, hopefully reducing the stress and unnecessary drama that always accompany families after a death.
A comprehensive estate plan can also reduce estate and inheritance taxes, protect your assets, and avoid unnecessary court cases, expenses and costs.
No one wants to think the effect their death will have on their loved ones, but avoiding the subject can cause your loved ones more stress during a very difficult time. By planning ahead and continuing to adjust your estate plan as needed, your family will be able to enjoy the legacy you choose to leave them.
Here’s an article in Time Magazine that offers some good tips.
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