All of your assets and possessions make up your estate. From your bank accounts to your car, you have an estate whether you realize it or not. That estate needs to be protected to ensure that in the event of your death, your assets fall into the hands of your loved ones.
Many individuals assume that to make an estate plan is simply to write a will. However, estate planning is a more comprehensive process than writing a will, and it’s an important step for all adults to take.
Let’s go over the legal documents that are included in a completed estate plan. With your estate plan in place and kept up-to-date, you can have peace of mind in knowing that your wishes will be upheld after your death.
Why Estate Planning is Important
Estate planning is important because it secures the smooth transfer of your estate to your beneficiaries after your death. Without an estate plan, your loved ones may have to go through a complicated probate process before receiving their inheritance from your estate. This will prolong the time before your assets are put into their possession.
Probate is the process of legally verifying a will and transferring the assets to the decedent’s heirs. This legal process is typically only needed if the decedent didn’t create an estate plan or will. It’s ideal to avoid probate, given that it can be a lengthy process requiring professional legal services. Most people aim to save their loved ones from the probate process so that they don’t have to invest time, effort, and money into receiving their inheritance.
Estate Planning For Medical Treatment
Your estate plan is also important for medical care that may be administered during your lifetime. A living will is a document included in any estate plan that details your wishes for medical treatment in the event that you’re physically unable to express your wishes. This, along with a medical power of attorney, ensure that your medical treatment is in accordance with your wants and best interests.
The Contents of an Estate Plan
A Will or Trust
The number one document that you’ll find in any complete estate plan is a will or trust. The key difference between a will and a trust is when it takes effect. A will only takes effect after your death, while a trust takes effect immediately after its creation.
Your will details how you want to distribute your assets after your death. Additionally, it designates a guardian for minor children, if applicable. Your living will details your wishes for end-of-life medical treatment.
If you opt to include a trust in your estate plan, your will should only contain the assets that weren’t transferred into the trust during your lifetime. With a trust, you can transfer your assets to beneficiaries before, at, or after your death.
Beneficiary designations detail the heirs for the assets that are passed outside of your will. Life insurance policies, retirement accounts, and even bank accounts may be transferred outside of your will. So, it’s crucial to keep up-to-date beneficiary designations in your estate plan to ensure that all of your assets are distributed according to your wishes.
Letter of Intent
A letter of intent is a document addressed to the executor of your will. It explains your wishes for your assets after your death, as well as the manner in which you want your estate to be transferred. A letter of intent may also include information about how you want your funeral to be carried out.
Durable Power of Attorney
Your durable power of attorney is the individual who is given the power to make decisions on your behalf. This individual will be tasked with acting on your behalf if you’re unable to do so. Naming a durable power of attorney ensures that the court won’t be tasked with distributing your assets. If this were to happen, your estate may not be handled in the way that you would like it to be.
Medical Power of Attorney
Your medical power of attorney is the individual who you name to make medical decisions on your behalf. If you become unable to make your own medical decisions, your medical power of attorney will ensure that the treatment you receive is in your best interest.
These are the main documents included in a standard estate plan. Your plan may include additional documents as needed, depending on your estate and personal needs.