George K.
Estate planning involves the process of determining how someone’s assets will be managed, preserved, or distributed after their death or incapacitation. Planning involves elements like naming an executor and beneficiaries, making up a will, setting funeral arrangements, and establishing a trust to limit state taxes.
Will preparation is probably the most important and often complicated component of estate planning. Here are three things that you should know about estate planning.
1. Estate Planning Protects Your Family
The most important thing that you should know about estate planning is that it is not only for the rich. Settling your estate can be problematic if you die without a plan in place. Regardless of your financial status, you need an estate plan in case something happens to you if you are the breadwinner of your family. An estate plan will help protect your family, and it plays a crucial role in the designation of your assets. Without a plan, the court will determine who gets what from your assets, and the process is often long and costly. The bad part about the court designating your estate is that it does not know your siblings.
2. Consult a Financial Advisor
Estate planning is a complex subject that very few people understand since they mistake it with will writing. A will is a document that spells who should get what from your assets when you die. On the other hand, estate planning is concerned about ensuring that your assets are protected from unexpected risks that can reduce the value of the estate. Therefore, it is recommended that you seek professional advice before you begin the journey of planning your estate. Financial advisors from Redwood Financial explain that you need to get insight into the steps involved in estate planning to ensure that it is legally valid. An advisor will help you set your estate planning goals and recommend the course of action to take to protect your estate.
The estate planning services that you can get from professionals include will writing. A will is a document that determines what each beneficiary will get from your estate. When writing a will, you should do it professionally. A poorly drafted written will may be rejected if it lacks credibility. Financial advisors can also help you with determining trusts, lasting powers of attorney, inheritance tax planning, and pre-paid funeral plans.
3. Power of the Attorney
To complete your estate planning activities, you must know the importance of the Power of Attorney. There are two types of Powers of Attorney, and the first one is a financial POA who will be responsible for handling your finances when you are incapacitated due to physical or mental health. A financial POA is authorized to access your bank accounts when you are ill and manage your hospital bills and other related expenses.
The second type of power of attorney involves Medical POA which dictates that your desires should still be fulfilled even when you become physically or mentally incapacitated. A healthcare power of attorney determines the medical care that you should receive as per your wishes. You can also state the things that you would not when you are incapacitated such as being kept alive through a feeding tube or ventilator. The healthcare power of attorney allows you to name a person who can make decisions on your behalf when you can no longer consent due to incapacitation. If you can no longer live independently, you may require long-term care in a nursing home.
Likewise, an estate plan plays a crucial role in eliminating family disputes. Family feuds often erupt when someone with money is incapacitated or dies. One sibling may think that they are better positioned to be in charge of the finances while others may demand more than other siblings. Estate planning is necessary since it helps to stop the fights before they begin. Through the power of the attorney, you can choose the person who controls your assets and finances thereby quelling any family disputes.
If you want your loved ones and your assets protected when you can no longer do it, you need an estate plan. Estate planning is about ensuring that you have the right legal documents in place that will help manage your estate and carry your wishes when you are incapacitated or in the event of your death. Estate planning is critical since your beneficiaries may face unintended consequences if you do not have an estate plan. For instance, your beneficiaries could face tax burdens if you die without leaving an estate plan. An estate plan can also help you set a trust or arrange for your children’s health and educational requirements.
