It’s not always easy to make plans, especially if you need to think about your estate. Still, estate planning is fundamental to getting your affairs in order before potential incapacity or passing away. For this reason, it’s essential not to leave estate planning until the last moment; it’s easier when you complete the process beforehand. But before looking for a free POA form, read this article to learn the three basic estate planning components you should consider.
Estate planning is a preparation process through which you establish the tasks for managing your assets before you pass away or are incapacitated. The process involves determining how you will pass on your property to loved ones, also referred to as legacy planning.
Although nearly two-thirds of adults in America think 55 is the best age to complete the estate planning process, just 45% of people over 55 have their estate planning documents ready in the US.
So, what are the three components of a comprehensive estate plan? Learn what the components are and why they’re important just below.
A living trust or will are two documents establishing how you hope to distribute your assets when you pass away. If you’re suffering an illness or are in the later years of your life, establishing a trust or will is important as these documents ensure you’ve declared your estate plans legally.
There’s a crucial difference between a living trust and a will. Whereas a will must go through probate, which is a process in which the court supervises estate distribution plans, a living trust does not.
Remember that the legal requirements or details can depend on state stipulations when writing a will or living trust. For this reason, you may want to contact an estate planner to establish your options.
During the estate planning creation process, make sure you name your beneficiaries. A beneficiary is the person you choose to receive property, money, or heirlooms from you (the benefactor).
It’s crucial to ensure your designations for beneficiaries are up to date and keep in mind that there are a few different benefits you may want to pass on. For example, you may pass on retirement plans or insurance policies, which you don’t pass on via the estate.
If you’re unsure what a power of attorney is, they permit an agent to act on your behalf. Some examples of a power of attorney include a medical or financial power of attorney. These take effect when you establish one after becoming incapacitated or unable to make decisions on your own. They’re important if you still need to file taxes or handle finances and want to avoid handing power over to a judge.
Each state has its own law related to power of attorney, so always check the state requirements and reach out to an estate planner to get the right advice.
The three main kinds of power of attorney include durable, medical, and financial power of attorney.
A medical power of attorney means the agent can make health-related choices for the principal as set out in the legal document. It takes effect if the principal can’t make decisions for themselves related to health care.
A financial power of attorney means an agent can manage financial affairs for a principal, such as filing taxes or depositing their social security checks. It takes effect if the principal can no longer manage these financial actions alone.
A durable power of attorney is a subcategory of financial power of attorney. This document means the agent can handle property, legal, or financial issues for the principal, as stipulated by the agreement.
Estate planning is a fundamental step toward managing assets before you pass away. It’s important to get the process underway before such a time that you might be unable to make decisions. Always remember the three crucial components of the estate or legacy planning – power of attorney, designations related to beneficiaries, and a living trust or will.
These components will make it easier to get the process complete. If you’re still unsure about state stipulations for a living trust or will, make sure you complete the required research. Start your estate planning with sufficient time, and incorporate these components to simplify the process.