Estate planning can be an uncomfortable subject that many people prefer not to discuss because it involves answering questions that some may find difficult to answer. Such questions can include:
- What happens to your assets if your spouse remarries after you die?
- Do you trust your children to be responsible with their inheritance?
- Is there a family member you want to cut out entirely?
These types of topics, along with the concept of one’s own death, can make it easy to postpone setting up an estate plan. However, it is important to understand that not having
an estate plan can lead to unintended consequences for your spouse, children, and other beneficiaries. In particular, an estate plan provides you the ability to do following:
- Control who receives your assets after your death and how they are distributed.
- Identify who makes decisions on your behalf if you are incapacitated.
- Identify who should care for your minor children.
- Avoid probate and maintain privacy.
- Mitigate estate and gift taxes.
Draft Early and Review Often
Whether you have an existing plan or are preparing to establish a brand-new one, you should think about your estate plan as a five-year plan. Think about what should happen to your assets and who should be responsible for making decisions should something happen to you in the next five years. Your estate plan is revocable and amendable while you are living. Therefore, you should review your plan every several years to ensure it still functions well and accomplishes your goals.
Types of Documents in an Estate Plan
A comprehensive estate plan includes several documents. The most common are:
- Trust: The primary document in a trust-based plan.
- Will: In a plan that does not include a trust, the will is the primary document and contains the dispositive provisions of your plan.
- Financial Power of Attorney: Appoints an individual to act on your behalf for financial matters if you are incapacitated
- Healthcare Directive: Appoints an individual to act on your behalf for healthcare decisions if you are incapacitated.