5 Essential Elements of a Good Estate Plan
Estate Planning is the clear instructions that describe how to distribute your property and your money, among survivors, when you are no longer here, or no longer capable.
Whether you want to talk about it or not, whether you want to believe that somehow you are going to escape death and live forever, or not, planning for what happens after you leave here, is a critical part of planning for the future.
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Many people think estate plans are for the wealthy. The truth is: if you have assets then you have an estate. Your estate includes all of the money, property, jewelry, cars, houses, land, retirement plans, investments, and savings accounts, that you own. Estate Plans protect your assets.
Whether or not you are rich or poor is not the issue. The issue is, do you have something of value, and do you want to control what happens to it when you die? If the answer is no, then an estate plan is not for you. If the answer is yes, then you need an estate plan.
With that said, just about everyone needs an estate plan, but very few people actually have one. An estate plan can run you anywhere from $1,500 to tens of thousands of dollars, depending on the vastness of your assets.
For the average person, a good solid estate plan may run you around $2,000 to $3,000, and it’s worth every bit of it. Estate Planning is about leaving a legacy and providing for generations that will survive after you are long gone.
This takes planning, forethought, a vision, and MONEY.
Here are the 5 Elements of a Good Estate Plan
1. Trust
A Trust, as a crucial part of your Estate Plan, is a fiduciary arrangement that allows a third party, called a Trustee, to hold assets on behalf of a beneficiary or beneficiaries. A trust is a legal vehicle to pass assets through to a Trustee, who holds those assets in a “trust fund”.
Choosing a “Trustee” is very important and there are various potential avenues for deciding on a trustee. Be sure to discuss your options with a trusted legal advisor, and your potential trustee.
2. Durable Power of Attorney for Finance
A Durable Power of Attorney for Finance is a legal document that grants someone legal authority to act on your behalf for financial issues, if you are unable to do so. The fact that it’s “durable” simply means that the document stays in effect if you become incapacitated and unable to handle matters on your own.
3. Power of Attorney for Health Care Directive
A Power of Attorney for Health Care Directive, is a legal document where you designate someone to be your representative, or agent, in the event that you are unable to make, or communicate, decisions about all aspects of your health care.
4. Probate
Probate is the formal legal process that gives recognition to a will and appoints the executor or personal representative who will administer the estate and distribute assets to the intended beneficiaries.
5. Living Will / Last Will and Testament
A Living Will or a Last Will and Testament is a legal document where a person expresses their wishes as to how their property is to be distributed at their death. A will names one or more persons, called an Executor, to manage the estate until its final distribution. A will is a part of an Estate Plan.
A will can be created separate from an Estate Plan, and can sometimes be a less expensive alternative to a full blown estate plan. However, a will is typically an integral piece of an estate plan and it allows you to be as specific as you want to be when carrying out your wishes.
2 Additional Elements of a Good Overall Estate Plan
One – Life Insurance is a contract between an insurance policy holder (you) and an insurer (the insurance company)where the insurer promises to pay a designated beneficiary a sum of money (the benefit) in exchange for a premium, paid by you, upon the death of the insured person (you). Life insurance is the low hanging fruit that many people have, but most people don’t have enough of.
Get a good term life insurance policy. It’s very inexpensive, and it’s the cornerstone of a good estate plan. If you are reading this and don’t have a term life insurance policy, get it immediately.
Two – Schedule of Gifts: This is for the small things such as a couch, watch, family photos, valuable cookware, or anything with sentimental value. Be sure this is communicated with your loved ones, and it can easily be located.
The Bottom Line
Having an Estate Plan adds another level of security and peace to your life and the lives of those who will be here when you leave, and Its money well spent.
Remember, Estate Planning is the clear instructions that describe how to distribute your property and your money, among survivors, when you are no longer here, or no longer capable. Even if you think you have nothing, you still have something! And, it includes the critical element of life insurance.
Everyone has stuff and everyone is going to die. So, do your due diligence and consider discussing an Estate Plan with an attorney. They can be more affordable than you think and its well worth it.
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