Seven Things You Need in Your Estate Plan
Essential Components of a Healthy Estate Plan
When most people think about estate planning, they may think it simply means having a legal will or trust. While these are essential components of an estate plan, there is much more to consider to make sure your wishes are properly fulfilled and your assets are most effectively distributed. Review the following components of a healthy estate plan to make sure your wishes will be respected in the event of an unforeseen event. Making regular checks and updates to your plans can save your family from grief in the long run.
- Wills and Trusts – A will or trust is an essential component of every estate plan, even if you do not have substantial assets. Wills ensure your property is distributed according to your wishes. It is important that the assets you have bequeathed match other designations you have made.
- Beneficiary Designations – Assets from a 401(k) or a life insurance policy can be passed on outside of a will. Maintaining your beneficiary designations is essential if you want to avoid having your assets distributed through the court system. It is important to check and make updates to your beneficiary designations annually, or when an unexpected life event occurs.
- Letter of Intent – A letter of intent is a document left to your executor or beneficiary with the purpose of defining what you want done with a particular asset. These letters can provide details about funeral arrangements or other special requests. While this document is not legally binding, it could help to inform a probate judge of your intentions if your will is considered invalid for some reason.
- Durable Power of Attorney – A durable power of attorney is important to have so an agent or a person you assign will act on your behalf when you are unable to do so yourself. This document gives the agent power to make financial and legal decisions as if they were you. Without a power of attorney, a court may be left to decide what happens if you are deemed to be mentally incompetent.
- Health Care Power of Attorney – Different from a durable power of attorney, a health care power of attorney designates another individual (typically a spouse or family member) to make crucial health care decisions on your behalf if you become incapacitated. This person should be someone who you trust and would recommend a course of action you would agree with. A secondary health care power of attorney can be designated in the event your initial pick is unable to act in the time of need.
- Guardianship Designations – If you have children who are minors, picking a guardian is an important component of an estate plan. The person or people you choose should share your values and have the capacity and willingness to raise children. Without these designations, the court could decide who your children live with (including someone you might not have selected), or in extreme cases, the children could become wards of the state.
- Charitable Contributions – A durable power of attorney is important to have so an agent or a person you assign will act on your behalf when you are unable to do so yourself. This document gives the agent power to make financial and legal decisions as if they were you. Without a power of attorney, a court may be left to decide what happens if you are deemed to be mentally incompetent. Having a charitable component in your estate plan ensures the nonprofit organizations you support will continue to thrive beyond your lifetime. Passing on assets through your bequest in your will or a beneficiary designation, permanently cements your charitable legacy and represents the values most important to you. While some may worry about not having enough to pass on to heirs, a charitable gift of any size can make a tremendous impact on the organization and will teach others about the importance of giving back.
How many of these components does your estate plan include? Of course, each aspect will not apply to every individual, but you want to ensure that your beneficiaries are supported and your wishes are met in the event you become incapacitated.
At Saint Leo University, we want you to have the information you need to make informed decisions. Because of this, we have created an estate planning guide that can help you along the way. You can request a free copy of our estate planning guide today to help guarantee your wishes are met later.