Many people believe that estate planning is only necessary for the wealthy. In reality, a basic estate plan is essential for everyone, regardless of income or net worth, because we all want to minimize confusion, unnecessary costs and stress for loved ones after a death or disability. Did you know that without proper planning, assets like real estate, retirement plans, and bank accounts can end up in limbo for many years?
-Everyone should have the following three items in place:
- An up-to-date Will or Trust
Wills are easy to create, but they require the essential distribution of titled assets to go through probate. Probate is a legal process that involves the following:
- Validate the will and designate an executor or personal representative to legally administer the decedent’s estate
- Identify, inventory, and appraise the deceased person’s property
- Pay debts and taxes
- Distribute the remaining property as the will directs to the beneficiaries
-The probate process often requires a lot of technical paperwork and court appearances, and the resulting legal and court fees are paid from the estate’s property—reducing the amount passed on to heirs.
-A Trust has many benefits that a will cannot provide. First, when they’re structured properly, trusts will help avoid guardianship or conservatorship if you become incapacitated. A will only works after death and is not a disability plan.
-Trusts usually avoid probate, which helps beneficiaries gain access to assets more quickly as well as save time and court fees. Depending on how it’s structured, a trust can also help reduce estate and income taxes,and protect beneficiaries from creditors as well.
- A Durable Power of Attorney
-A Durable Power of Attorney is a written authorization that allows to another person to make financial and legal decisions for the person that becomes hospitalized, disabled or incapacitated.
-Not all powers of attorney are the same. It may be valid immediately when it’s signed, or it may go into effect at a later point. But what makes it “durable” is the fact that it will survive your later incapacity.
-Powers of attorney for property should only be given to trusted individuals, especially those who have the knowledge with financial and legal matters. A Medical Power of Attorney can be given to another person to make medical decisions for you in case you are incapacitated.
- Updated beneficiary designation forms.
Beneficiary designation forms on life insurance policies, 401(k) accounts, bank accounts, and other assets will generally override any conflicting provisions within a will or trust. It’s essential to make sure all forms are checked and updated regularly ideally on an annual basis.
**If you would like more information regarding these issues, please feel free to contact us!**