Several people think that estate planning is an activity that is required only by the wealthy. This could not be farther from the truth. Everybody requires a solid estate plan, no matter what their income or net worth is. Having an estate reduces any scope of confusion, cuts all unnecessary costs, and lifts off any financial or estate-related stress from survivors.
According to a recent piece on Yahoo! Finance, which featured WealthCounsel, estate planning tends to be a difficult issue for several families. They, should, nonetheless make sure to do it. When families fail to prepare and document their assets properly – such as houses, savings accounts and retirement plans, they may be left hanging for years in settling matters, and in some cases may have to hire expensive legal professionals to resolve issues.
In order to avoid future troubles, all families must have the following estate planning tools:
An up-to-date trust or will
While wills can be easily created, they need distribution of assets to go through probate. Probate is a legal process which involves the following actions:
– Validating the will of the deceased person
– Identification, inventory and appraisal of the property of the deceased
– Payment of debts & taxes; and
– Distribution of the property in accordance to the directives of the will
Trusts are generally more expensive and need the assistance of a professional, but offer several benefits which wills cannot. When structured properly, trusts can be instrumental in avoiding conservatorship or guardianship should you become incapacitated. Furthermore, wills become active after your death, whereas a trust works all the time, including the time when you may be incapacitated.
A well-drafted power of attorney
A power of attorney is a legal document which authorizes assigned individual to instantiate legal and/or financial decisions on the owner’s behalf should they become disabled, hospitalized, or incapacitated.
There are several different kinds of powers of attorney – for instance, some become valid immediately after they are signed while other come into effect at a specified date. While some power of attorneys are made to stay active for only short periods of time (such as when the owner is vacationing overseas and needs someone to deal with legal matters at home), others are fairly long-term. Regardless of the type, the power of attorney must be durable and well-drafted and should make all intentions and directives very clear.
Updated beneficiary designation forms
Beneficiary designation forms on life 401(k) accounts, insurance policies, and other forms of assets usually override any and all conflicting provisions within a trust or a will. The estate owner must make sure to check and update all forms regularly – at least every year.
While it may seem complicated, these tools are fairly simple and will go a long way in making sure that your estate remains protected and goes to your loved ones after your demise. You can also enlist the help of an estate planning professional, who will help you create and/or update these tools and offer suggestions if needed.