Estate planning is required to be done very carefully. It can be pretty confusing to design an estate plan. You need to ensure that the heirs are getting the maximum benefit. Therefore, your estate plan should include five necessary elements. Find out what they are by reading this article.
A will is an essential document in an estate plan. It specifies who you want to name as your heir. It helps in ensuring that your assets are appropriately distributed in your absence.
● Benefits Of A Will
If you have young children, you should name their guardian in the will. The guardian will take care of the children in case your spouse is unable to. You can hire reliable will planning lawyers to receive assistance in designing a will.
It is essential to begin by stating your significant assets. You will have to mention who gets the specific property. You might want to leave a particular property with your friend.
It might be in your intention to donate a vast amount of their property to a philanthropic cause. You should include who gets what in your will. You will also have to mention who gets the rest of your property.
● Can You Donate All Your Savings To A Philanthropic Cause?
You have to be careful regarding how much property you want to leave for your spouse and children. In some states, you have to leave a particular amount of your property for them.
These legal arrangements are responsible for managing assets on behalf of a beneficiary. The person making this legal arrangement needs to specify how and when the beneficiary will receive the assets included in the trust.
● Types Of Trusts
Your estate can avoid probate with the help of revocable trusts. On the other hand, irrevocable trusts are capable of limiting taxes related to the estate.
1. Testament trust: A trust created inside a will is called a testamentary trust. The assets in a testamentary trust cannot avoid the probate process. You have to decide what kind of trust you want to make.
2. Revocable trusts: People often choose revocable trusts for the purpose of estate planning. But irrevocable trusts can be beneficial if you have charitable purposes in mind. Irrevocable trusts can be used for advanced estate tax planning as well.
3. Irrevocable trusts: You can modify a revocable trust during your lifetime. It can be broken as well if you want to. But irrevocable trusts will cause you to give up control of the provisions and assets in the trust.
3. Power Of Attorney
It allows someone else to manage your finances when you incapacitate. This document is particularly crucial for singles as there will be no spouse who can step in. It might happen that you are single and haven’t designated your power of attorney to someone.
In such a scenario, the court decides who will serve as your guardian. The court might end up appointing someone who you don’t think is ideal for serving as your guardian.
4. Health Care Directives
Health care directives are responsible for handling your medical decisions. If you have a living will, it should include instructions for your health care. You can also give a health care proxy to someone who will make medical decisions if you become incapacitated.
What Can Be Included In A Health Care Directive?
An advanced health care directive will ensure that health practitioners respect your wishes when it comes to treatment. Treatment includes medical, surgical as well as dental procedures.
● You can specify in your health care directives where you want to stay during your end-of-life care. You might want to be admitted to a particular hospital. It might even be your wish to stay at home during your last days.
● Some people even ask for spiritual care during their last days. It is also possible to mention which visitors you want to allow or who you want to limit.
How To Make A Health Care Directive?
A health directive needs the signature of two people who are not involved in it. It is not mandatory to hire an attorney to make an advanced health directive. You should give it to your physician so that it can be included in your medical records. It is also possible to change your health care directive if you change your mind at any point.
5. Beneficiary Designations
These are mentioned on life insurance policies and retirement accounts. You should review the beneficiary designations regularly. The designations determine who will receive benefits after your death. It is best to check these beneficiary designations a minimum of once every year.
If you have minors as your beneficiary, you should appoint a legal guardian for them. The legal guardian will have the responsibility of taking care of their finances until they turn into a legal adult.
You should talk to an estate planning attorney to ensure that you are able to incorporate the elements effectively. These elements will require complex legal documents, and you need to review them regularly.