(Californian News Times) - An estate plan is something that most people dread to do. It’s easy to postpone— sometimes because it seems like there’s still a long way to the future, or topics like retirement and death can be uncomfortable to think about.
However, in order to make the most out of your assets during your lifetime and leave a legacy behind, it’s essential that you have a successful estate plan drafted with the help of expert lawyers like those in Weiner Legacy Law if you live in California.
Estate Plan: What Is It?
An estate plan is a collection of documents that protects your estate or everything you own and how you wish to pass them down upon your death. It documents your wishes and indicates exactly who will guard these wishes and act on them once you’re gone.
Quick Note:
While most people think that estate means mansions and land properties, it actually consists of all assets and property that a person owns, including their cash, cars, bank accounts, savings, insurance, investments, jewelry, furniture, and other items of value.
Importance of Estate Planning
Estate planning may not be as exciting as planning for a vacation; however, doing it as soon as possible can ensure several benefits.
1. Protects Your Beneficiaries
If you think that estate planning is for those with high net worth, you’re wrong. Most families will need to plan for when something unexpected happens to the family’s breadwinner.
Even if you’re only leaving a small home, if you don’t decide who receives the property when you pass away, then you won’t have any control over what happens to it. This is because estate planning is all about designating heirs and beneficiaries of your assets— whether it’s a stock portfolio or your ancestral home.
Without a plan, a probate court will oversee and decide who gets the asset, processing it for months or years. Plus, it can get really ugly for those left behind. After all, the court doesn’t know who’s been responsible and who doesn’t deserve free cash to pay off their gambling debts.
2. Care For Young Kids
An estate plan can also protect your little ones.
While no one wants to die early and to leave their small children to fend for themselves, an estate plan can help prepare you for the unthinkable.
It should ensure that your kids are cared for in a manner that you approve and naming a guardian for your kids, in case both parents die before they can do anything for themselves.
3.No To Big Tax and Fees
Estate planning can also help protect your loved ones from the Internal Revenue Service (IRS). You want to transfer your assets to your beneficiaries while ensuring the smallest possible tax burdens required.
Without a plan, the amount that your beneficiaries owe the state and government— from estate taxes to inheritance taxes— could become quite a lot.
7 Must-Haves For Your Estate Plan
So, now that you’re convinced of the importance of an estate plan, here are seven features that should be included to ensure a solid and successful plan.
1. Last Will and Testament
A will should be one of the main features of every estate plan. It’s not reserved only for wealthy individuals but also those who don’t have substantial assets.
Drafting a will gives you the power to determine what’s in the best interests of your loved ones after you’re gone. This should also help you decide what will happen to all your assets with sentimental or financial value.
In general, a last will and testament should name an executor who will be in charge of following what’s in your will. This may also include any funeral provisions.
Without a last will and testament, the probate court will simply name an executor— usually a grown child or the spouse— for your assets.
2. Living Trust
A living trust is another essential feature for your estate plan, particularly if you have substantial wealth or property. It allows you to pass your assets to your beneficiaries while avoiding the potentially time-consuming and expensive probate court proceedings.
Setting up a trust means naming a trustee— your spouse, grown child, or a lawyer— to oversee and manage your property. Unlike a last will and testament, a living trust can be used to distribute an estate now or upon your death.
3. Letter of Intent
This is a simple document left to your beneficiary or executor. Its purpose is to define what you wish to be done with a specific asset after your incapacitation or death. It also contains requests, instructions, and other important financial or personal information that you don’t want to include in your will.
For instance, you can write detailed instructions on how you want your memorial or funeral service to be performed in this document. A letter of intent doesn’t require a lawyer.
A letter of intent doesn’t have legal weight. However, it can help to inform the probate judge of your wishes and intentions. This can also help in distributing your assets if your last will and testament IDare deemed invalid for some reason.
4. Guardianship Designations
Although most living trusts and last will and testaments incorporate this as a clause, some actually don’t.
So, drafting a guardianship designation is incredibly important if you’re considering having kids or having minor children. This allows you to pick a guardian for your kids should you become unable to care for them anymore.
Make sure that the couple or individual you choose shares your views and beliefs, is genuinely willing to raise your kids, and is financially sound. Like with any designations, a contingent or backup guardian should be named as well.
Without this component on your estate plan, the court could decide that your kids live with a family member who you wouldn’t trust and choose. In extreme cases, the court might even choose to have your kids become wards of the state.
5. Durable Power of Attorney
Drafting a durable power of attorney simply means choosing someone to decide and act on your behalf— legally and financially— when you’re unable to do it yourself.
It allows your chosen agent to transact real estate, make financial transactions, or other legal choices as if they were you. Note that this kind of power of attorney is revocable by the individual at a time of their choosing— usually when the individual is still mentally competent or physically able.
A durable power of attorney is one of the most critical components of an estate plan that you shouldn’t put off. This is because you need to be legally competent to assign this role. Seniors tend to worry about relinquishing their control and put it off for as long as they could or until they’re no longer legally competent to do so.
Without this, the court may decide what happens to your assets which may not be what you wanted.
6. Durable Healthcare Power of Attorney
If a durable power of attorney oversees your legal and financial affairs, a durable healthcare power of attorney is responsible for your medical decisions if you become incapacitated. It designates another individual— usually the spouse of a family member— to make critical healthcare decisions on your behalf when you can’t.
It often comes with a living will that has no relation to a traditional last will and testament or living trust which deals with your estate. This allows you to explain in advance of your death the kind of care that you do and don’t want, in case you can’t communicate it in the future.
If you want this component in your estate plan, make sure that you carefully pick someone who you trust, shares your beliefs and intentions, and who would most likely recommend a course of medical action that you would agree with. After all, that person would literally have your life in their hands.
7. Beneficiary Designations
When you open a bank account or retirement plan or purchase life insurance, you’ll be asked to name a beneficiary— the person you wish to inherit the proceeds with when you pass away. Such designations are powerful in that they take precedence over the instructions in your last will and testament.
If you don’t name a beneficiary or if your beneficiary is unable to serve or deceased, a court could be the one to decide what happens to your asset. And a judge is unaware of your beliefs, intent, or situation, which may lead to decisions you wouldn’t have wanted.
This is why it’s critical to maintain your beneficiary— and contingent beneficiary— designations on such accounts. Keep these documents with your estate plan, reviewing and updating them as your life changes.
Take note that named beneficiaries should be over 21 years of age and mentally competent. Otherwise, a court will get involved in the matter.
Conclusion
Drafting your estate plan will be a huge favor to your loved ones. Getting your affairs in order ensures that you don’t leave your survivors to face a complicated and lengthy legal mess.
Although it’s not as simple as drafting your last will and testament, by ensuring that the above features are included in your estate plan, you can help your family members to gain control or access to your assets should you become unable to do so yourself anymore.
