As you acquired assets throughout your life, you probably planned on passing them down to your loved ones—when the time comes. Now, it may be time to establish an estate plan.
Your estate plan will outline your wishes in life and death. You can also include provisions or special requests and establish the distribution of assets.
Generally, an estate plan should include:
- A will
- One or more trusts
- Power of attorney
- Guardianship and beneficiary designations
- A letter of intent
You can include these five elements in your estate plan, but there may be more to consider. Depending on your situation, your estate plan may need additional documents.
The purpose of an estate plan is to ensure your loved ones are taken care of after your passing. It also outlines your wishes if you are no longer able to make medical or legal decisions on your own. An estate plan should prevent family disputes—but that isn’t always the case.
Are you worried about probate?
The probate process is a legal proceeding that removes you as the owner of your property and assets after you die and appoints the executor.
With a will, you own the assets until you die. On the other hand, a living trust owns your assets as soon as you create one, thus creating a trust may avoid probate.
Most people want to avoid probate because it can be a lengthy and exhausting process. Although the probate process is not as complicated as it used to be, it can still be time-consuming and stressful for your loved ones.
Probate can become difficult; lawsuits by heirs can make the process more complicated. Depending on your situation, you may choose to establish a trust, a will or both.
Although it is tough to have estate planning conversations with your designated beneficiaries, managing their expectations could help them understand your decision and appreciate the thought and effort you put into your estate plan so they can benefit from your legacy after you are gone.