Creating an estate plan isn’t necessarily a fun thing to do, but it’s necessary for all adults regardless of wealth. While some people think all you have to do is write a will, there’s much more that you have to do to have a comprehensive estate plan.
As you’re considering your estate plan, it’s crucial that you think about these five points.
#1: Take care of your affairs
If you become incapacitated, you need someone to handle your affairs. You can designate a power of attorney for health care and one for finances. While the same person can have both, you can also choose different individuals for both. Power of attorney enables a person to act on your behalf to make decisions for you.
#2: Set up and fund trusts
Trusts are a way to avoid probate court while still getting assets to your loved ones. You can set up a revocable or an irrevocable trust. You keep control of assets and can change a revocable trust, but you can’t change an irrevocable trust because you don’t control the assets.
#3: Include digital assets
Your digital assets should be included in your estate plan. Some of these can be valuable, so be sure to name who gets what accounts. Be sure you leave the login information for the person who should have access to the account so they can get into it.
#4: Learn about taxes and gifting
Taxes can have a considerable impact on what your beneficiaries receive. Find out what taxes the estate will have to pay. You might be able to reduce that liability if you give out gifts now; however, be sure you know the current gifting limits.
#5: Leave a letter of instruction
While the letter of instruction isn’t a formal part of the estate plan, it’s valuable. This letter should include any special instructions you have for your loved ones. It doesn’t have to go through the probate court so you can put in your wishes for funerals or memorials, as well as the location of important documents like life insurance. You can also include passwords and usernames for online accounts.
The components you include in your estate plan should accurately reflect your wishes. Creating a comprehensive plan ensures your affairs are taken care of if you’re incapacitated and that your loved ones are cared for after you die. Working with someone familiar with estate planning and who understands your wishes is crucial.