You can’t predict what might happen tomorrow, but there is something you can do today to help better prepare for whatever comes your way – you can get your estate plan in order.
Putting these documents in place can help ensure that not only are things done according to your intentions, but can also give you peace of mind knowing you’ve set in motion specific plans that can be implemented should the unexpected occur.
Regardless of your age or life circumstances, there are a few basic estate planning documents that every person should have in place.
Here are 6 main documents that you should consider when creating your estate plan:
1. Health Care Directives
No one wants to think too much about all the scary what-ifs that are possible when it comes to our health. But living through a pandemic has done a lot to wake us up to the reality of the very serious risks out there. In addition, humans are living longer in general, which means that—as we get older—there’s a greater chance that we could be beset by some physical or mental disability that could incapacitate us in some way.
A health care directive identifies your primary and alternate designations regarding who can make health-care decisions for you if you are unable to do so yourself. In addition, it details your wishes for end-of-life care, pain management, organ donations, religious preferences, and other details. It also extends to cover what happens after you die in terms of autopsy, cremation/burial, and so forth.
2. Durable Power of Attorney
Similar to a health directive, this document names the people (a primary and a successor) who will act on your behalf in personal and financial matters if you become incapacitated. Power of attorney gives the person designated the ability to manage your affairs—paying bills, accessing bank accounts, hiring professionals, establishing trusts, etc.—if you are unable to do so.
3. Last Will and Testament
Without a Will, the fate of your assets is left up to the state, which is probably not what you want. A Will ensures that your decisions about how your assets are distributed (and to whom) are honored after you are gone. Your Will also deals with important details such as appointing guardians for minor children.
It’s tempting, especially for younger people with “uncomplicated estates,” to take a DIY approach to preparing a Will; but that’s hardly ever the right course of action. If a Will is not prepared properly, it can be easily contested, which can lead to all kinds of complications. It’s also important to update your Will regularly as your circumstances change.
4. Living Trust
A living trust offers many advantages over a standard Will in that it can help you avoid probate, increase your privacy (a Will is a public document that must be filed with the probate court upon a person’s death), and ensure greater personal and seat protection in cases of incapacitation.
A trust can also help you protect your heirs in a variety of ways, including defining specific terms about how and when they receive their inheritance. An experienced estate planning attorney can tailor different kinds of trusts to suit your exact needs.
5. Beneficiary Designations
While not an estate planning document, per se, designating beneficiaries is an important task that should not only be done immediately upon the establishment of any relevant account, but also updated regularly to reflect your current circumstances. Beneficiaries are designated for assets like IRA and 401(k) accounts, life insurance policies, and annuities. Assigning them is typically a very quick-and-easy process. Just remember to update them after any major life changes such as marriage, divorce, a child coming of age, and so forth.
6. Business Succession Planning
If you own a business, succession planning is another important part of your estate planning. Succession planning covers issues like who will take over the business when you are gone; how much control you would like to retain if you’re just retiring; all the various arrangements that need to be addressed with family members, co-owners, non-family owners, and third parties; taxes (estate, gift, and capital gains); the disposition of company shares/interest; and more.
The Bottom Line: There’s No Time Like the Present
Thinking about estate planning can be intimidating, especially if you haven’t really considered yourself to be a person who needs that kind of financial planning. But, as you can see from the types of documents that are involved, estate planning is for everyone and can offer very real benefits regardless of life circumstances and experiences.
If you have questions, or would like help developing your own estate plan, our attorneys would be happy to help. Reach out to us any time at 860-236-7673, and give yourself and your loved ones some much-deserved peace of mind.
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