You have probably been responsible and developed a financial plan, including a plan to pay for your retirement. However, have you taken the time to build an estate plan that distributes your assets upon your death?
If you are like many individuals, you may think that drafting a will or letting the state take care of your distributions is adequate. However, if you want your assets distributed to specific heirs, you need a comprehensive estate plan. These are the components you should consider.
Power of attorney
If you cannot make decisions for yourself, typically due to medical challenges, you need to name someone you trust to make your decisions. A durable power of attorney handles all your decisions, whereas a general or limited power of attorney handles limited or specified decisions and duties.
Last will and testament
Your last will and testament is the primary document used in the probate process. It discusses the distribution of your assets and guardianship of your minor children. If you have shared assets, their distribution occurs automatically.
Your living will identifies the healthcare you approve of, such as life support, in the event that you become terminally ill or severely incapacitated to the point where you cannot care for yourself.
If you have significant assets, you may consider creating a revocable or irrevocable living trust. Trusts can reduce the tax burden on your heirs because you transfer your assets into their names before your death. It also reduces or eliminates the probate process. You will need to specify your beneficiaries and a trustee who handles the distribution and management of the trust.
You can do your best to ensure your wishes are upheld by regularly reviewing and updating your estate planning documents.