What is estate planning? Estate planning for newbies
Most Americans don’t think estate planning is for them. Common misconceptions about estate planning are that you only need to make an estate plan unless you have a large amount of wealth or dependents to protect.
While is true that estate planning is done primarily when you get married, have kids, and have money saved in the bank, any person over 18 can benefit from estate planning.
In this article, I will share some valuable information regarding how a novice can make an estate plan.
What is estate planning? What should you include?
Estate planning relates to instructions or a “plan” when you are not able to manage your affairs due to death or incapacity. An example of incapacity is being in a coma or having dementia. If you cannot make decisions on your own, who will handle your property and assets? Who will provide and care for your children and/or pets?
These are the important documents to include in your estate planning:
- Will
- Trust
- Power of Attorney
- Healthcare Power of Attorney
- Living Will
First, know the importance of a will
A will is a legal document that will describe how you want your financial affairs to be handled after your death. A proper will names who will receive your money, property, and other assets. It will also give instructions as to who should have custody of your young children.
Will requirements
- You need a sound mind. You should know what is written on the paper and agree with it. Additionally, you should know what you are giving away (your estate) and who you are giving it to (your beneficiaries).
- The will must be properly witnessed. Witness requirements vary state by state.
Inclusions you can make in the will
- Name a guardian for your minor children.
- Instruct how you will pay off your debts and liabilities.
- Name an executor for your estate who will conduct the property division and follow the written instruction in your will.
Second, look into the benefits of a trust
A trust is a tool that handles property outside of your will. In a trust, you name a trustee who acts as a fiduciary to handle your assets. It is important to name a trustee who is ethical and responsible with money.
The benefits of a trust
- The trust can continue even after your death.
- Your trustee will manage your assets for you and your trust beneficiaries when you are incapable of doing it.
- There are certain tax advantages to putting assets in a trust.
Third, create a Durable Power of Attorney
You need a Durable Power of Attorney document. In this document, you name an agent to manage who will manage your money when you are unable to manage it. Your agent can be a trusted relative or friend who will accept the responsibility of managing your finances.
Fourth, appoint a Healthcare Power of Attorney
A Healthcare Power of Attorney names an agent, usually a spouse or close family member, to take care of your health care decisions if you are unable. You should nominate a person whom you can trust who understands medical information and knows your wishes. Similar to a durable power of attorney, you should name a backup person if the first person is unable to serve as your agent.
Fifth, make a Living Will
A Living Will or Advance Medical Directive outlines what measures you want (or don’t want) taken when you are at an end-stage terminal illness or dying. You elect if you want tubes to feed and hydrate you or ventilators to breathe for you. You can opt for comfort and pain medication. While it is unpleasant to think about, imagine it will be worse for your loved ones if they have to decide for you.
Final words
Estate planning is one of the most important financial decisions you can make to secure your family’s financial life. For the novice, it is advisable to seek out an expert’s help for estate planning. An estate planning attorney can answer questions about your situation.
While an online will writing program is tempting if you have a small estate, consider the problems of doing it yourself. Furthermore, as you age you will gather more wealth and possible dependents to protect. Therefore, it is wise to enlist the help of an estate planning attorney.
This guide is to help you understand what estate planning is and how it protects you and your family.
Author Bio: Catherine Burke is a financial writer for online payday loan consolidation. She provides information on successful cash loans and payday loan consolidation to help people get over a difficult patch. She lives in Kansas and has earned a frame in the matter of payday loans.