While most people understand many benefits result from creating a will to distribute their property after they die, only about four out of every 10 Americans have created an estate plan.
Wills and trusts are key parts, but a comprehensive estate plan contains many other documents to protect you and your legacy while helping your loved ones deal with a difficult time.
Five key components to consider
Too many people are confused or don’t want to think about end-of-life decisions. However, an experienced estate planning attorney demystifies the process to identify the best strategy for your situation. This includes:
- Creating a living trust: Sometimes called a revocable trust, this legal document puts assets in a trust that you can still manage while you’re alive. Once you die, your appointed trustee transfers them to your heirs. This saves time and money as these assets avoid probate.
- Updating beneficiaries: Several assets go directly to beneficiaries after a person dies. These include 401(k)s, pensions, IRAs, insurance policies and annuities. If your beneficiaries are not up to date, these assets will go through probate, and a judge will decide who receives them.
- Pour-over will: This vital document accompanies a living trust acting as a safety net to add items to the trust that weren’t placed there during your lifetime. This also allows you to distribute them as you see fit and avoid probate.
- Power of attorney: This document gives legal permission for someone you trust to act on your behalf if you become too ill or injured to make decisions for yourself. You can designate different people to make financial or medical decisions for you.
- A living will: This document has nothing to do with distributing property. Rather, it details whether you want life-saving measures to be taken if you are incapacitated, as well as when and how these measures are taken.
Reviewing an estate plan is crucial
Once you get an estate plan in place, make sure you update it when changes happen, such as births, deaths, marriages, divorces, retirement or any other life events that could change how you want your estate administered.
Finally, make sure trusted family members or friends know that you have an estate plan in place and where they can find the documents. Doing this helps ensure that the estate process moves as smoothly and efficiently as possible.