The Value of Effective Estate Planning
First, let’s quickly go over why you should bother with estate planning in the first place. The process of estate planning has numerous benefits. Estate planning has great benefits for you as well as your potential heirs. Here are some of the highlights.
- With a proper plan, you not only plan for your future but also that of your closest family. An estate plan helps you make early plans concerning the distribution of your assets, and advanced estate planning tools can even help your heirs avoid probate or undue federal taxes.
- Good estate planning indicates your preparation for anything that comes your way. If your become incapacitated or die today, how will your assets move to your preferred heirs? If you become incapacitated, a proper estate plan has the list of people that’ll make medical directives on your behalf.
- With a proper estate plan, you can pick a financial planner or executor for your taxable estate when you’re no longer able to supervise. This can help make managing your estate much easier.
- You can plan for the guardianship of your minor children if you die early in your estate plan. You can pick one or two individuals who can take care of them when you’re no longer around.
This is by no means an exhaustive list, but you can see how an estate plan can really help with your financial affairs and make things easier for your heirs. Now, let’s get into the estate planning tools that can make this happen.
6 Critical Estate Planning Tools
Good estate planning tools can help increase the efficacy of your estate planning process and result in a better experience and inheritance for your heirs when the time comes. As you go through this list, keep in mind that different estate planning tools work best for different estates. Make sure to pick the tools that work well for you and the particulars of your estate.
1. A Last Will and Testament
How can you determine your beneficiaries and the size of assets each of them should receive? A last will and testament can help you ensure that such issues are keenly addressed. This document carefully lists the beneficiaries of your estate, i.e. your children, current spouse, a close relative, friends, charities, and the like. It also lists your assets, including real estate, retirement accounts, trust assets, any form of income stream. Finally, it names who should get what.
To add to that, the last will allow you to select an executor for your estate. An executor is a trusted individual tasked with the distribution of your property. Such an individual ensures the implementation of the basic elements of your will to the letter.
A well-crafted will mitigates the possibility of conflicts arising during asset distribution as well. So, if your family is prone to bickering, goodwill can keep this to a minimum.
2. A Living Trust
Do you have a wide variety of property and assets? A living trust may be a great estate planning tool for your estate, whether you have significant or modest assets.
First, there’s the matter of probate. If you select one of the various types of trusts, you guarantee that your assets won’t undergo a probate proceeding before distribution to any contingent beneficiary. This makes matters considerably easier for your beneficiaries and can even help minimize inheritance taxes.
However, a living trust is unique in that it refers to a legal arrangement where you transfer your estate assets to a trust for fixed amounts of time while you’re still alive. Here’s how it works:
- Pick the type of trust best for your estate’s financial plan. In most cases, people prefer irrevocable trusts to revocable trusts. If not sure what to choose among the two you can seek legal advice. Not sure what that means? You can learn more about financial planning with a living trust here.
- Name the potential beneficiaries to these assets after a given period of time.
- Relax for the duration of the trust! With a living trust, you can still access and control your property.
- If you die, the chosen trustee distributes your property according to the wishes you put forward. The trustee will not alter how the asset distribution process takes place; they only oversee it.
3. A Living Will
A living will is not the same thing as a living trust. In fact, it’s a way for you to look out for your own interests in a detailed way.
A living will enable you to pass detailed instructions to your loved ones on how you want them to care for you in complex situations. Since you don’t want them to struggle in making key decisions when working with a health care provider, you can use a living will.
Typically, you can include any advanced directive in your living will. This could range from complex to less complex instructions. Some of the areas you could address are:
- How you want certain healthcare decisions made. Such medical powers may include what happens to you when placed in a life support machine.
- What emergency life-saving techniques do you want. This form of health care power includes whether you would wish to receive life-saving drugs or not.
- Whether you’d like to receive life-prolonging medical care if you have a high chance of survival in a given medical situation.
- If you wish to receive palliative care in the form of pain-relieving drugs.
- If you’d like lifetime exclusion from things like dialysis, surgery, cardiopulmonary resuscitation, or diagnostic tests.
To ensure every aspect of your living will is followed, you should consider using it alongside a durable power of attorney. Then, if an emergency comes around, your immediate family or medical professionals can use your living will in any given situation.
4. Power of Attorney
If you become incapacitated, making key financial decisions for your asset base might become impossible. You also may not have the time to approach any financial institution to oversee your estate. It is at this point that you need a trusted person to serve as your financial power of attorney.
During a period of incapacitation, the trusted individual with Power of Attorney can make key financial choices for your actual estate. Then, when you recover from incapacitation, you can resume your financial duties over your substantial assets.
The position of a financial power of attorney only exists temporarily (during your period of incapacitation). However, having a financial power of attorney can ensure that your estate doesn’t fall into a financial crisis during incapacitation.
A financial power of attorney is, therefore, a good way to manage income sources and other financial matters while you’re unable to do so. Different types of power of attorney and medical directives can also offer peace of mind regarding the unknown aspects of your future (like potential lawsuits).
5. A Letter of Intent
At times, you may decide to communicate some things through a letter instead of a will. Note that a letter of intent doesn’t give very detailed information as is the case with a will or testamentary trust. You might choose to use this estate planning tool if you already have a will and don’t want to modify it or work with an estate attorney.
In your letter of intent, you may include:
- A specific instruction
- A request
- Important personal information, or
- A key financial information
In essence, in this letter, you have an opportunity to convey your wishes on specific requests. An example of a specific wish is how you want your funeral or memorial service handled. You may even indicate your preferred location for burial or other such details.
6. A Digital Asset Trust
How would you wish your electronic property distributed? As the name suggests, a digital asset trust is an estate planning tool for your electronic property. Some of the electronic properties to have in your digital asset trust include:
- Digital photos
- Computer hard drive
- Personal information stored in the cloud
- Information in online accounts like Twitter, Facebook, and Google
In your digital asset trust, you can provide a list of passwords that can be used to access these sites by your adult children. You may also provide legal decisions on what you want to be done with your social media accounts and emails.
How to Incorporate Estate Planning Tools Into Your Estate
Now that you know the critical estate planning tools, how will you get started with the whole process? Here is an eleven-point estate planning checklist to follow:
- Draft a will
- Name a guardian for your minor children (if applicable)
- Making a living will
- Name a Power of Attorney
- Choose a living trust
- Sign up for a life insurance policy
- Update beneficiary details on your will, trust, and life insurance policy
- Meet all estate tax obligations
- Put digital assets in order
- Leave instructions regarding the disposal of your remains after death
- Choose a safe place to store your estate planning documents.
If your estate falls below the threshold limit needed for estate taxes, the last will, and testament estate planning tool is best for you as you go through this process. Need help? Keep reading!
Get Help with Paperwork for Estate Planning Tools
Proper estate planning is a complex topic. At times, you may need to consult an estate planning lawyer for help in estate planning. However, approaching an estate planning attorney for professional advice is often not the best option because of the high fees.
One of the best estate planning options, therefore, is to request the services of a legal document assistant. At A People’s Choice, we offer consultancy concerning estate planning at very affordable rates. We assure you of great online service as you select and implement different estate planning tools. We offer a wide range of estate planning services, such as:
- Healthcare directives
- Financial power of attorney
To get started, contact us here or call us directly at 800-747-2780.