First of all, you should know what estate planning is. There is a notion that estate planning means only drafting a will or a trust, which is completely wrong. It includes much more so that upon your death, your beneficiaries get all the assets fast and seamlessly.
Importance of Estate Planning
A successful estate planning allows a trusted person or organization to take control of your assets if you become physically or mentally incompetent to look into. This does not imply to the rich person only. Everybody can utilize it to ensure that his property, finances, or business transactions happen properly. And his heirs get their rightful properties after one’s death.
Without proper planning and supporting documents, the distribution will not be possible as per your wish because probate law will take the lead in that case. Through such planning, you can grant permission to your family members or power of attorney to carry out the distribution as you intended for even if you are alive but have become incapable.
The estate planning will not be valid without the documents below. Let’s check them out.
Wills and Trusts
People believe that wills and trusts are only for the wealthy individual because it is complex and costly. This is totally false. Rather, every estate planning should include wills or trusts or both to ensure a property distribution according to the individual’s wish. Only to have a will is not sufficient. Though, the wordings mentioned in the document are immensely crucial. So, it is always necessary to hire an attorney while drafting a will or trust to help you in using correct words. They will also help you format as well as protect your assets from legal challenges.
Power of Attorney
The second important point is to appoint a durable power of attorney (POA). This means you are assigning an individual or an organization to act on your behalf upon your death or even when you are alive but have lost competency to do it for yourself due to physical or mental illness.
In the absence of power of attorney, the law will decide what to do with your assets, how to distribute it, which may not be the way you intended for.
Choosing a power of attorney assures that the business transactions, money matters, property distribution, and other valuable legal decisions will occur on your behalf as you want. POA is ideally nothing but a tool that will act as if it were you. Every decision of POA should be the best of your interests.
Typically, in families, the spouse is chosen as a power of attorney to control the entire assets of an individual. However, any close relative, friend, or trusted advisor can act as the agent too.
Beneficiaries for Estate Planning
It is important to maintain a beneficiary and a contingent beneficiary in the will to transfer your assets after your death. Insurance plans should also include both beneficiary and contingent beneficiary because they are sometimes not counted in the will.
Without mentioning the name of your beneficiary, it is obvious that the court will pass your possessions as per the law because the judge is not aware of your preferences. Again if the beneficiary passes away, the court has the authority to decide on the distribution of your property and funds if not otherwise mentioned.
The beneficiaries should be of over 21 years of age to receive the inheritance. For a minor beneficiary, you can assign a guardian till he becomes 21 years.
Letter of Intent
This is basically a document as you have made for describing your intention with a particular asset. Your executor or beneficiary will have the letter of intent upon your death or incapacitation. In some letters of intents, you might find some special requests or wishes, such as funeral details of the individual or the medical expenses.
Estate Planning – Guardianship
In some wills and trusts, this clause is often overlooked. If the beneficiary is minor, it is extremely important to pick a guardian until he or she becomes 21 years. Make it a point that the guardian you choose is financially sound, well mannered, and respects your preferences. He can genuinely play the role of a guardian and raise the kid as you want.
Healthcare Power of attorney
This is an exceptional POA that designates another individual to make vital health care decision to suit you if you have any mental or physical incapacity.
In addition to these, you can also add other documents you feel helpful for estate planning.