There’s a common misconception that the estate planning process is only relevant for wealthy individuals and families. That simply isn’t true, and neglecting to come up with your own estate plan can prove to be a mistake with significant financial and personal consequences. Proper estate planning can save you and your family headaches and heartaches down the road.
A well considered estate plan makes sure that your family is taken care of and your financial goals are met after you die. This is true regardless of whether you consider yourself to be wealthy or not.
An estate plan is generally comprised of several different documents, including the following:
A Will. A will is a document that identifies your assets and assigns the beneficiaries you want to receive them upon your death. For example, your cars, real estate, and your baseball card collection can all be included in your will. You can also specify that any other assets you haven’t specified will go to whomever you specify.
Assignment of Power of Attorney. A power of attorney gives a specific person the ability to make financial decisions on your behalf. It’s important if you’re in the hospital and unable to make important financial decisions. It’s also important to have a power of attorney in place after you die in case there are outstanding financial issues that must be addressed.
A Living Will or Health Care Proxy. A living will or health care proxy is also known as a medical power of attorney. It’s essentially a document that identifies who can make medical decisions on your behalf and what you’d like those decisions to be. For example, do you want to be put on life support if it’s necessary for your continued survival?
A Trust. Depending on your financial situation, a trust may also make sense. According to the National Association of Financial and Estate Planning, a trust makes sense if you have a net worth of at least $100,000 and:
– You have a sizeable amount of assets in real estate;
– You want to maximize real estate tax exemptions;
– You want to provide for the care of someone without disqualifying them for government assistance; and
– You want to provide for heirs in a managed way, such as requiring a beneficiary to meet certain conditions in order to receive benefits from the trust.
Everyone Needs a Will. Absolutely everyone needs a will, even if they don’t think they have enough possessions or financial assets to worry about. Most people will also want to have a health care proxy along with a designated power of attorney. These three components of an estate plan are absolutely necessary. However, not everyone needs a trust. The first step, once you’ve created your living will, is to begin to identify your assets. You can then determine if a trust would be beneficial to your family members and you can begin to create your will.
There are many services available online that can help walk you through this process. You can also visit with a financial advisor or accountant to help you manage the steps. The most important step you can take is the first one. Create your living will and start the estate planning process today.
Tags: estate plan, retirement advice, retirement planning
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on Wednesday, October 2nd, 2013 at 2:08 pm and is filed under Planning.
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There’s a common misconception that the estate planning process is only relevant for wealthy individuals and families. That simply isn’t true, and neglecting to come up with your own estate plan can prove to be a mistake with significant financial and personal consequences. Proper estate planning can save you and your family headaches and heartaches down the road.
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