Estate planning is less overwhelming if you break it into four areas of focus.
Being prepared for major life and death decisions requires thoughtful, thorough planning. When it comes to your estate, this involves an all-encompassing look at the decisions to be made, who makes them and how assets are divided. To get your estate in order, you will need to prepare four major documents.
Designating a financial power of attorney is one of the most important steps in estate planning. Whomever you name as your financial power of attorney will make all of your financial decisions if you become unable to do so on your own. By picking someone you trust to make those decisions, you can eliminate potential controversy and stress. You can also avoid the costly, lengthy legal process the estate will undergo if a court makes decisions for you.
A will is the central part of your estate plan. Your will states who will receive various parts of your estate, including savings, homes and other assets. By listing each asset and specifying what person or charity will receive it, you make your wishes clear. Although a will won’t eliminate probate, it may reduce the degree to which the court and government entities are involved in your estate.
A living will is one of the most crucial documents in terms of medical decisions. Simply stated, a living will spells out what specific medical treatments you do or do not want to be given if a medical emergency renders you unable to make those decisions. Major medical choices, such as whether to resuscitate or to be put on artificial respiration, can be declared within the living will. But a living will is only one of the medical documents you should prepare within your estate planning. The other is a medical power of attorney.
A medical power of attorney appoints someone to make medical decisions if you cannot. If you don’t have a medical power of attorney (also known as a healthcare proxy), the decisions automatically become your spouse’s responsibility. If you are unmarried, it will fall upon adult children or parents. By designating a specific individual to make these crucial decisions, you make it clear who you want in charge. While these situations are never easy, making your wishes clear and assigning a person to be your voice can eliminate confusion and ensure your directions are followed.
These are the four basic documents you’ll need when planning your estate. Each document will cover various parts of your overall estate, but you may also want to consider other issues, including taxes. A financial professional and qualified estate planner can educate you, help you record your directives and guarantee the legacy you leave is the one you choose.