Many people think that estate planning is only for the wealthy. This couldn’t be further from the truth! Estate planning is for everyone, regardless of how much money you have. An estate plan is simply a set of instructions for what should happen to your belongings when you die.
Creating an estate plan ensures that your wishes will be carried out and can save your loved ones a lot of time, stress, and money. Unfortunately, most people do not have an estate plan. In fact, according to a poll, 60% of adults do not have a will or living trust.
So what exactly should your estate plan entail according to Outlook Wealth Advisors?
Here are some basics:
- A will: A will is a legal document that states how you would like your property and possessions to be distributed when you die. If you die without a will (known as “dying intestate”), state law will dictate how your assets are distributed, which may not be in line with your wishes.
- Advance directives: Advance directives are documents that spell out your end-of-life care preferences, including things like life-support and organ donation. These directives give your loved ones guidance on the kind of medical care you would or would not want to receive if you were critically ill and unable to communicate your wishes yourself.
- Power of attorney: A power of attorney is a legal document that gives another person permission to make decisions instead of you, in case you become unable to make decisions yourself. There are two types of POAs: financial and medical.
A financial POA gives someone else the ability to handle your finances if you are unable to do so yourself. A medical POA appoints a person (known as a “health care proxy”) to make decisions about your medical care if you are unable to do so yourself.
- Beneficiary designation forms: Beneficiary designation forms are used for things like retirement accounts and life insurance policies. They allow you to name the people who will inherit these assets upon your death.
- A living trust: A living trust is a legal document that states how you would like your property and possessions to be distributed when you die. Unlike a will, a living trust goes into effect immediately upon your death. This means that there is no delay in distributing your assets—everything can be transferred seamlessly and quickly according to your wishes.
Estate planning may seem like a daunting task, but it is actually quite simple—and it’s something everyone should do, regardless of age or wealth.