Five Elements of an Estate Plan
Estate planning is a vital process that all individuals should go through. There are key elements to estate planning that should be considered in order to ensure your assets and loved ones are taken care of. An estate planning lawyer can help you navigate this process and create a plan that is right for you. By understanding the key components, you can make informed decisions about your future and protect what is important to you. Working with an experienced lawyer will help ensure that your plan is tailored specifically for your needs. Five common elements of an estate plan include the following:
A trust is a legal arrangement in which one party (the trustee) holds property on behalf of another party (the beneficiary). The trustee has a fiduciary duty to manage the trust property in the best interests of the beneficiary, and the beneficiaries have a right to information about the trust and its administration.
There are several different types of trusts that can be used for estate planning. The two most common ones are revocable living trusts and irrevocable trusts.
Revocable Living Trusts: A revocable living trust is a type of trust that can be changed or revoked at any time by the settlor (the party that created the trust). This type of trust is commonly used to avoid probate proceedings after the settlor’s death.
Irrevocable Trusts: An irrevocable trust is cannot be amended or revoked after it has been created. This type of trust is often used to protect assets from creditors or to minimize estate taxes.
2. Power of Attorney
A power of attorney is a document that gives permission to another person to make decisions on your behalf. This person is known as your “attorney-in-fact” or “agent.” They can be given the authority to handle financial and legal matters, or make healthcare decisions for you. This is done in the event that you become incapacitated or pass away. This can be helpful in avoiding probate, which is a costly and time-consuming process.
3. Healthcare Directives
A health care directive, sometimes called a living will, is a legal document that sets forth your wishes regarding medical treatment in the event that you are unable to communicate those wishes yourself. A health care directive may also appoint someone to make decisions on your behalf if you are incapacitated.
There are two types of health care directives:
1. Health Care Proxy: This type of directive appoints someone to make decisions about your medical treatment if you are unable to do so yourself.
2. Living Will: This type of directive lays out your wishes regarding medical treatment in case you become terminally ill or incapacitated.
A will allows you to specify how you would like your assets to be distributed after you die. You can use a will to designate beneficiaries for your property, appoint a guardian for any minor children, and name an executor to carry out your wishes. It’s important to note that a will only applies to assets that are solely in your name – if you own property jointly with someone else, or if you have beneficiary designations for accounts like life insurance policies or retirement accounts, those assets will not be governed by your will.
5. Beneficiary Designations
When it comes to estate planning, one of the most important things you can do is ensure your beneficiary designations are current. A beneficiary designation is a legal document that lists the person or people who will receive your assets when you die. The assets can be anything from life insurance proceeds to investment accounts and retirement benefits.
It’s important to keep your beneficiary designations up to date because they take precedence over any other documents in your estate plan, like a will or trust. This means that even if your will says that your assets should go to someone specific, if you have a beneficiary designation for those assets that names someone else, the beneficiary designation will override the will.
If you need help with estate planning, don’t hesitate to contact us to schedule a free consultation.