What is an estate plan?
Estate planning is the process of designating how your affairs, including your assets, should be handled in case of your incapacity or death. Your “affairs” include your income, your assets and liabilities, your health, and your financial responsibilities.
For high earners and individuals with substantial assets, an estate plan is a critical component of your – and your family’s financial security. Whether preserving wealth for your family or looking to leave a legacy, these key documents will help ensure your intentions are honored.
Essential Documents for a Comprehensive Estate Plan
Wills
A Will directs how your personal assets – like real estate, savings and investments – will be distributed after your death. Some assets with a beneficiary designation are not covered in a Will. These may include qualified retirement accounts, pensions, life insurance policies or other instruments with a designated beneficiary.
Trusts
Trusts can provide additional benefits beyond a Will. A trust is a legal arrangement in which a grantor assigns assets to a trust and designates a trustee to manage the assets of the trust according to instructions specified in the trust document. Essentially, a trust allows you to designate how and when beneficiaries receive their inheritance. A trust can also help you avoid probate and, in some cases, protect your assets from creditors or lawsuits.
Powers of Attorney
A Power of Attorney is a legal document that grants another person the legal authority to handle your financial and legal matters if you become incapacitated. Without this document, your family may need to go to court to gain control over your affairs.
Healthcare directives
A healthcare directive or Advanced Directive outlines your specific preferences if you are unable to make healthcare decisions for yourself. In the healthcare directive, you will name a healthcare proxy, a trusted person who can make decisions based on your wishes, values, and priorities.
Key Takeaway
A complete estate plan isn’t just about preparing for the worst – it’s about ensuring peace of mind for you and your family. These key documents form the foundation of a well-rounded estate plan.
Remember, estate planning is not a set-and-forget deal. There can be costly consequences to not updating your estate plans.