One of the most confusing parts of a financial plan for most people is the estate plan. From dealing with the inheritance left to the breaking down allotments that are assigned to the heirs, it becomes hard for most people to fully understand what is needed to create an ideal estate plan.
We’re here to simplify things for you. Here are 4 aspects of a good estate plan:
Trusts can be termed as legal agreements which hold assets for the defined beneficiaries. There are several types of trusts. The person that sets up the trust has the power to dictate when and how the beneficiaries will receive the defined assets that are in the trust.
There are revocable and irrevocable trusts. Revocable trusts can aid your estate to avoid probate and irrevocable trusts can aid in limiting estate taxes. You can also create a trust in your will known as a testamentary trust. The assets in this trust, however, are not exempted from probate.
- The Power Of Attorney
The power of attorney gives you the provision to designate someone else to come in and oversee your finances in the event that you become incapacitated. This is of utmost importance for single people who have no spouse to take up after them and handle the assets.
If you as a single person have not designated the power of attorney, then a court of law will make the decision of who should take the place of being your guardian. The disadvantage of this is that the court may end up choosing someone that may not be your ideal or preferred option.
- The Health Care Directive
Health care directives work in a much similar manner to the power of attorney. The only difference is that the power of attorney will deal with your finances while the health care directives will deal with your medical decisions.
There are two major documents in the health care directives. The first is the living will which is a written statement that offers instructions for how your healthcare should be in the event that you end up being incapacitated.
The second document is a health care proxy which defines the person that will make the medical decisions for you when you become incapacitated. If there is disagreement among your family members regarding your health care, these documents will be of great importance in solving those differences.
- A Will
A will is a very important aspect in an estate plan. This document clearly states the people who will take over your assets and it will help in ensuring that your assets are properly distributed when you are no longer there.
If you have people under your care such as children or employees if it’s a business, it is advisable that you define whom you would prefer to act as their overall overseer in the event that you together with your spouse end up being incapacitated.
These 4 aspects make up a good estate plan. Have a business that you need to make an estate plan for? If yes, then here’s an estate planning guide for small businesses.