Estate planning is the process of organizing how your properties should be managed or distributed in the event you become incapacitated or upon your death. As a result, you get to enjoy peace of mind, knowing your interests and those of your loved ones are protected, both at present and in the future.
Benefits of estate planning
Essentially, estate planning is a kind of ‘housekeeping’ activity with numerous advantages. On top of enjoying peace of mind, other benefits of drafting an estate plan include;
- It can protect your loved ones, especially minors who may need a guardian in your absence. The plan outlines how and who should manage your property until the children attain maturity.
- It helps eliminate sibling battles over who should get or manage what. This protects the interests of those who may be victimized, thereby keeping them from the courts.
- It’s a way of reducing the financial burden on your beneficiaries by minimizing taxes – federal, state, and inheritance taxes – as well as providing a clear administration guideline, thus eliminating complex court processes and costs.
In a nutshell, taking time to prepare your estate plan, no matter how small or large your property is, guarantees a smooth continuity of your affairs should you become incapable or absent to manage them.
Must-have estate planning documents
The number of documents you need to prepare may vary depending on your situation. But essentially, you’ll need a will, durable power of attorney, letter of intent, health care power of attorney, and beneficiary designations.
Beneficiary designations refer to asset recipients on financial accounts, insurance policies, etc. Often, these can receive their allocated assets even without a will, as the contracts you have with the said institutions are binding.
Healthcare power of attorney
This document assigns an agent to make your healthcare decisions if you become incapacitated. This can be a spouse, or someone you trust would make sound decisions on your behalf.
Durable power of attorney
A durable power of attorney (POA) appoints an agent to act on your behalf should you be unable to do so. It gives the agent power to make estate decisions until such a time when you can be able to so, or upon death. Note that you can revoke or revise a durable POA whenever you want.
Letter of intent
A letter of intent is where you give instructions on every other small detail that you feel is crucial, like special requests regarding, say, funeral arrangements, and so forth. Essentially, this contains details that you don’t think are necessary to include in the will.
Perhaps, this may be the most detailed of the documents. It should elaborate on how every last of your properties gets distributed. It’s essential to prepare your will to ensure your estate is distributed as you desire, hence protect your beneficiaries from the court and out-of-court battles. However, remember to keep the will consistent with other documents. For instance, if your children are the designated beneficiaries for your insurance cover, the will should indicate the same.
Though preparing these documents can be tedious and time-consuming, the benefits thereof are worth the trouble. In the event of misfortune or early death, your beneficiaries are guaranteed a smoother transition. Losing you or seeing you incapacitated is already a heavy emotional burden. Getting your estate planned lightens the burden.