Creating an estate plan gives your loved ones something to follow when you pass away. You can set this up in a way that clearly conveys what you want and makes it easy for them to understand. There are several components that you should consider when you are trying to put this together.
All adults need to have an estate plan, even those who don't have a lot of assets. This is because there are several other aspects of life that come into the picture in this plan. Making sure that you have everything planned can take stress off of your loved ones during a stressful time in their life.
Passing down assets
There are two ways that you will pass down assets in your estate plan; however, you need to take a close look at the terms. Some assets are governed by a payable on death designation. These are usually bank, financial and investment accounts. Even life insurance has this designation. This means that they don't have to be covered in your estate plan. Instead, you only need to review the documents to ensure they are still going to the right recipient.
Other assets should be covered in the will or in trusts. The trusts you create enable you to pass down assets to your loved ones without them having to go through probate. There are many types of trusts, so think carefully about your goals and the person's circumstances when you are deciding what type of trusts you are going to use.
For example, a person who is on asset-based programs like Medicaid shouldn't directly receive large inheritances since this can impact their eligibility. You could use a special needs trust to pass assets down since anything in this type of trust won't count against them.
In your will, be as specific as you can. This takes away the chance of misunderstandings. Anything that is part of a trust or that has a payable on death designation shouldn't be covered in the will.
End of life plans
You should have your end of life plans in your estate plan. This includes the living will that discusses medical care for times when you aren't able to say what you want. You can also set up powers of attorney designations for someone to make your financial decisions and medical decisions if you are incapacitated. These plans should be very clear so that your medical care is in line with your wishes.
Your estate planning isn't over when you have this all done. Instead, you should plan to review the terms annually or when you have big changes in your life. This ensures that everything is up to date.