Estate planning is essential to any person who has assets, loved ones, and desires for having their assets be properly distributed after they have passed on. Within the world of estate planning there are plenty of technical terms and complicated processes that could make any person’s head swim. But the reality is that estate planning, in any form, can be broken down into three essential elements; the will, the power of attorney, and the beneficiary designations. Without all of those three elements, an estate plan is woefully incomplete.
The Will Or Trust
After you have passed away, your estate is normally transferred to the probate court for review. The way to bypass probate court and get your assets distributed immediately is to have a trust. A trust will also allow you to protect your assets while you are alive, and it can help your family to consolidate its wealth.
But if you do not have a trust, then your estate goes to probate where it can languish for a long time. If you do not have a will, then your estate could be distributed in ways that go against your final wishes. But a will spells out your final wishes and, once approved by the courts, a will can make sure that your final instructions are used.
The Power Of Attorney
Life can throw a curveball at any time and completely alter all of your plans. If you are suddenly unable to speak for yourself or make decisions for yourself, then that can throw your financial world into chaos. If you are unable to speak for yourself as you are close to passing away, then that could threaten your entire estate.
Properly designated and filed powers of attorney will make sure that people you trust will speak on your behalf if you are unable to speak for yourself. One of the first tasks your estate planner will undertake is drafting and executing your powers of attorney, which are very important decisions that you will have to make.
Whenever you take out a life insurance policy or start a 401(k) plan, you should always completely fill out your beneficiary page. That means that not only should you have a primary beneficiary, but a secondary and possibly tertiary as well. If you primary beneficiary is unable to accept your estate distribution, then it is always a good idea to have a secondary beneficiary to make sure the money goes where you want it to go.
Estate planning can be complicated, but all estate plans sit on the foundation of three basic vehicles. Without these three vehicles, your estate could go into chaos after you have passed away. But with these basics covered, you can rest assured that the people you love and the organizations you treasure will be taken care of, according to your wishes, after you have passed on.