You know that you need an estate plan, but if you are like many people, you may be putting off creating it. Or perhaps you created one years ago and have not updated it since. Either can be a huge mistake.
An estate plan is a way to pass on your assets after your death, but it is also a way to pass on your values, comfort your heirs and preserve your legacy. Creating a proper estate plan can be complex, but most plans include at least four components.
A last will and testament is the starting point for many individuals. In it, you designate heirs and assign assets to specific individuals. You also name a guardian for your minor children and spell out your funeral wishes.
A trust can serve many of the same functions as a will, but there are key differences. A trust goes into effect while you are alive and may outline conditions that affect the distribution of assets upon your death. It typically contains instructions regarding what should happen if you become incapable of managing your financial affairs. In most cases, trusts allow your heirs to prevent lengthy probate and avoid certain taxes.
While a will involves assets, a living will has to do with medical care. The name can be confusing, which is why people also call this document an “advance directive.” Whatever you call it, this document addresses end-of-life decisions. It speaks for you when you are unable to speak for yourself.
Powers of attorney
A power of attorney gives someone else the power to make decisions on your behalf. There are several different types, often focusing on medical or financial matters, and you may need more than one.