Estate planning is a process that addresses the financial, legal and personal realities of passing away. You may have the desire to create an estate plan, but it can be difficult to know where to start. It may seem like a convoluted process at first glance, but it is actually quite simple when you know the basic terms.
While your estate plan should be unique according to your particular situation, most estate plans consist of some basic tools. Here are the core components of an estate plan.
A will is a document that specifies what you want to happen to your assets when you die. You can also name a legal guardian for your kids if both parents pass away. Another important aspect of a will is designating an executor who will manage and distribute your estate. This is the backbone of any estate plan.
If you have a complex estate or specific wishes regarding the distribution of assets, you may benefit from setting up a trust. A trust can help you avoid probate, reduce estate taxes and put restrictions on when beneficiaries receive assets.
Financial power of attorney
A power of attorney lets you name an individual to access and manage your finances when you die or become incapacitated. You can appoint someone you trust to conduct banking transactions, sign contracts, manage accounts or sign deeds. This essential estate planning tool is also called a durable power of attorney.
Your estate plan can also include a living will, which is a document you use to express your wishes regarding end-of-life medical treatment. You can describe your desires regarding life support if you ever become incapable of making this sort of decision by yourself. This is a great way to give your family members and close friends peace of mind.
Now that you know the main foundations of an estate plan, you can start creating one!