A 2017 study found that 60% of US adults did not possess a will or an estate plan. Many people believe that estate planning is only crucial for wealthy families or that a will, alone, will take care of any financial questions after their passing.
However, estate planning is something that everyone should consider, regardless of wealth or a will's existence. With professional help and the right estate planning documents, it may be easier than you think.
Estate planning goes beyond listing the inheritors of your assets. It lays out a clear plan for exactly how and when your benefactors will inherit your assets. It also creates a legal plan in the event that you become unable to control your assets before the time of your death.
So, what exactly do you need to get started? Read on to discover the five most crucial estate planning documents to bring with you when you meet with your estate planning attorney.
1. Wills and Trusts
As we mentioned earlier, having a will doesn't accomplish the same things a comprehensive estate plan does. However, a will or trust is an essential component of any estate plan. Wills and trusts are both estate planning tools that transfer your assets, both liquid (e.g., money) and fixed (e.g., property). However, a will only becomes active at death while a trust is active on the day you create it. Therefore, a will goes through a legal process called probate. A trust avoids probate, saving your family time and money. A trust-based plan also has other advantages over a will, including estate tax minimization, asset protection, disability protection, and greater financial protection for your heirs.
2. Durable Power of Attorney
Another document you want to bring to your estate planning meeting is a draft of a durable power of attorney (POA). A durable power of attorney is an individual of your choosing that can come to represent your financial decisions if you become unable to do so, yourself. With this legal document, your POA can enter into financial transactions on your behalf when necessary. A durable POA is revocable, which means that they will relinquish that control if necessary. (This can occur if you are no longer unable to take care of your finances or are deceased.) Having a POA protects your finances from third-party decisions. Without one, financial decisions may be left to the court, who may not act according to your wishes. Many married couples establish a reciprocal POA with one another, although your durable POA can be anyone over the age of 18 with sound mental capacities.
3. Beneficiary Designations and Letter of Intent
In addition to your will or trust, you may need to establish beneficiary designations for individual possessions or assets. These may include things like your 401k, life insurance, and more. It is essential to make sure that your beneficiary designations do not contradict any of the intentions outlined in your will or trust, as this can cause legal troubles. You will generally want to establish both a beneficiary and a contingent beneficiary for each of these assets. A contingent beneficiary becomes the inheritor of said assets only if the beneficiary has passed away or is otherwise unable to take control of them.
In addition to your beneficiary designations, it is good to draft a letter of intent. Give this letter to either the trustee of your trust or to your beneficiary themselves. You can more clearly define what you want to happen to your various assets in the letter of intent.
Your letter of intent can include information like any funeral planning details you prefer or other special requests.
4. Healthcare Power of Attorney
A healthcare power of attorney is a person of your choosing who can make important healthcare decisions for you if you are not able. (This can include whether or not doctors should perform specific procedures, how long you should remain on life support, and other decisions.)
5. Guardianship Designations
This final document is crucial for parents of minor children. Some wills may include a guardianship designation but not all do, so this is something you should discuss with your estate planning attorney.
Most people establish guardianship designations if they have children under the age of 18 or intend to have children in the future. A guardianship designation's objective is to legally establish who will take over the charge of raising your children if you are unable to or die. You should choose a person or couple who you are close with, trust deeply, and who will raise your children the way you intend.
Note that the court can determine where your children will end up without guardianship designations. In extreme cases, they can become wards of the state. If you know who you trust with the charge of raising your children, you should establish guardianship designations immediately.
With These Estate Planning Documents, Law Mother Can Protect What's Important
Estate planning is not something that only wealthy families should do. It also cannot be replaced with a will alone. With these estate planning documents, we can help you protect your family, health, and your most important assets.
To find out more about how Law Mother can be of service, contact us today. We make estate planning simple and available to everyone in Colorado.
Proper estate planning can keep your family out of conflict, out of court, and out of the public eye. Are you ready to protect your loved ones and legacy? Check out my next presentation.