Many people are understandably reluctant to think about an estate plan. After all, it relates to mortality and letting go of everything acquired over a lifetime. It also raises issues around family relationships and money, two things that are highly volatile.
What's in an Estate Plan?
An estate plan encompasses a lot of different issues. It answers the questions:
What happens if you can't take care of yourself or your affairs?
Who will make decisions for you?
Who will inherit your money and property?
How will it be given to them?
How can you limit taxes on transfers?
An estate plan might consist of:
Will – determines who you are going to gift your property to when you die
Revocable Trust – takes property out of your name while you are alive and provides instructions for that property when you die
Power of Attorney – allows someone else to make financial decisions while you are alive
Advance Healthcare Directive – gives instructions for your healthcare and specifies who can make those decisions
While you have your wits about you, you can create and amend these instructions. It's not uncommon to make changes as your financial situation and relationships change over time.
Do You Need an Estate Plan?
Many people have no estate plan. They haven't left any instructions. They haven't said who will inherit their property. They haven't said who will make financial and healthcare decisions for them if they are incapacitated.
If this sounds like you, rest assured. Someone will get the authority to make decisions for you. Your property will be distributed. There are procedures to make sure everything that needs to get done gets done. It might get complicated. It might not.
Why should you care?
Why You Might Want an Estate Plan
It ensures your property goes to who you feel deserves it and in the most cost-effective and time-efficient manner.
It takes the burden of making decisions off others. It's a stressful time. There's already enough for others to do.
There's less likely to be disputes. You can manage others’ expectations and there's no ambiguity about intentions.
You can avoid or limit taxes. Making the wrong choice here can have huge financial consequences.
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