No everyone understands the concepts of estate planning, which is why some of us often see an estate plan as irrelevant or basic. If you are yet to grasp the full concept of estate planning, I would be very glad to sum it up for you in a sentence. Estate planning is a plan that can define your future and the future of those you care about. Estate planning is so important that failure to create one while alive could make life miserable for you, especially if you become incapacitated along the way.
A well-developed estate plan is what you need
It is one thing to contact an attorney and request that he or she create an estate plan for you, and it is another thing to contact an attorney and request that he or she creates a well-developed plan for you. If you are a newbie, you may not even be able to differentiate between a good estate plan and a terrible one. What are the components of a good estate plan? What does it looks like? What are those legal documents that a well-developed estate plan comes with? These are the questions you should ask yourself before hiring an estate planning attorney.
Lucky for you, we’ll be answering those questions briefly.
Components of a well-developed plan
A well-developed plan is like a well-prepared dish; it contains all necessary ingredients to give the meal a mouthwatering flavor. Due to ignorance and lack of experience, a lot of people often fail to spot a poor plan, and this has resulted in a lot of difficulties for both the estate owner and his or her beneficiaries.
Below are some of the components of a well-developed plan:
WILL
An estate plan without a will cannot be called an estate plan, as a will is the first document you’ll think of when preparing your estate plan. A will is basically a document that contains information regarding how you want your assets to be distributed and managed. It also contains the names of your estate beneficiaries, including the portion of your assets you want each individual to inherit.
If you have minor children, you can as well designate guardians for them in your will in case you and your spouse become incapacitated.
Trusts
Another component of a well-developed plan is a trust. Trusts are legal setups that hold assets on behalf of a beneficiary or beneficiaries. There are several types of trusts, and the individual setting up a trust can determine how and when beneficiaries receive the assets present in the trust. With a revocable trust- a trust where its terms can be altered or modified without the consent of the beneficiaries- you can escape the expensive and time-consuming probate process. Irrevocable trust, on the other hand, can help restrict exposure to estate taxes.
Power of attorney
A power of attorney is an important component of an estate plan, and it will come in handy when you become incapacitated. It is a legal document that allows you to designate an individual who will make important financial and legal decisions on your behalf. Without a power of attorney, the court in your state will step in and select an individual who will be charged with making those important financial and legal decisions on your behalf.
Healthcare directives
Healthcare directives are almost similar to a power of attorney. The main difference between power of attorney and a healthcare directives is that, while the former handle your financial and legal decisions, the latter handles your medical decisions. There are two main documents in this category; a living will and a healthcare proxy.
A living will
A living will is a legal document that state how you wish to be cater to in the event of your incapacitation. A healthcare proxy, on the other hand, allows you to choose an individual who will make those important healthcare decisions on your behalf.
If you feel that your family member may have different opinion regarding how you want to be catered to when incapacitated, it is best you have these documents in place to make sure that you wishes are adhered to.