Estate planning sounds important, and yet it can also be intimidating. Putting the words “estate” and “planning” together conjure pictures of wealthy boardrooms with graphs, charts and a laser pointer used by an impressive lecturer.
You may have heard you need an estate plan, but you may wonder why one is necessary. A few simple explanations can set your mind at ease. Once you become aware of the value a good estate plan can bring to your peace of mind, you are well on the way toward financial responsibility and family security.
Items in a simple estate plan
Estate plans can be as basic or as complex as you desire. People use estate plans to direct the distribution of their assets—meaning their cash and valuable property. You may choose a simple estate plan from a menu of different items, depending on your needs:
- Draw up a will – you can name the inheritors of your assets and a guardian for your small children.
- Think about a durable power of attorney – this document ensures that no one can change your financial wishes without your permission.
- Create a business succession plan – if you are a business owner, it is essential to make sure you conclude your business affairs accurately; if you are in a partnership, you may want to legalize your share of the buyout.
- Make advanced health care and funeral directives – if you become unable to make your final health care wishes known, they will exist in legal form; you may also set forth any desire you have for special funeral arrangements.
- Acquire life insurance – it will be helpful to your dependent family to have life insurance when you are no longer able to provide for them.
- Plan for the best estate tax strategy – protecting your assets from federal estate taxes will be an outstanding part of a good estate plan.
- Consider using a trust – a trust is an excellent means to protect your assets.
- Lock in your children’s inheritance – provide for each child as you wish; this can be effectively carried out through a trust.
- Name a beneficiary and executor – you can name a beneficiary to administer any trusts, and an executor will manage affairs upon your death.
- Store important documents – keep all the materials needed to settle your estate plan in a safe place, such as with your attorney.
A financial planner can explain each of these items and others you may want to know about in detail and how they can benefit your situation. You may not need every option; you have the final say on how you wish to protect your assets. You can feel peaceful and confident by knowing your family is secure.