Estate planning is an important aspect of your financial plan, but there are often many questions surrounding it—how do I get my affairs in order? Who will disperse my assets once I’ve passed? How do I ensure my wishes are met?
Here, we’ll dive into these questions and provide you with information on the four common estate planning documents you need to know. These can help you create an estate plan that promises to take proper care of your finances once you are gone.
If you’re looking for assistance in creating a personalized financial plan, speak with a CERTIFIED FINANCIAL PLANNER™ professional at Good Life Financial Advisors of NOVA today!
What is Estate Planning?
Estate planning is the process of organizing your financial affairs for when you pass away or are incapacitated. This requires you to leave clear instructions as to what will be done with your assets, who will inherit them, and the decisions you’d like to be made in the case of terminal illness. There are also many logistical items for you to consider so that you can help your loved ones avoid probate court and reduce how much you are taxed.
Four Most Common Estate Planning Documents
Explore the four common estate planning documents you need to know:
Last Will and Testament
A will is one of the most essential estate planning documents, as it gives directions to an executor for disbursing your assets amongst your heirs. A will can be used to bequeath money or property to heirs, assign guardians to minor children, or set up instructions for funeral costs. However, a will is on the public record, and your assets will need to go through probate court before disbursement. Oftentimes, people would prefer to avoid probate as it can take a long time and be costly.
Like a will, a living trust (sometimes referred to as a revocable trust or revocable living trust) can be used to leave assets to heirs, but a trust has stronger privacy protections and helps your heirs avoid probate court when assets are distributed. However, assets must be left in the possession of the trust for the document to be of any value, and the costs of setting up a living trust can be higher than creating a will. Additionally, you can assign successor trustees to step in should you become incapacitated, or decide you’d prefer not to manage your trust anymore. Another component of a living trust is the fact that it can be changed or even revoked. If you’re looking at a living trust, you need to understand the roles that “grantor,” “trustee,” and “beneficiary” play.
Power of Attorney
Unfortunately, death isn’t the only reason we need estate planning. If you become incapacitated and are unable to make decisions on your behalf, a will won’t kick in unless you’re deceased. By granting someone you trust Durable Power of Attorney, they’ll be able to handle your assets and affairs if you aren’t in a state of mind to do so yourself. It is imperative that if you do grant someone a Durable Power of Attorney, you trust them implicitly, as this document empowers them with a tremendous amount of authority when it comes to your finances. Additionally, powers of attorney lapse upon death, so it is important to have a will or trust in place.
Advance Medical Directive
Medical care at the end of life can be expensive and stressful. When we near the end of this Earthly existence, it’s important not only for our assets and debts to be properly handled. We must also express our wishes in how we would like various medical situations to be handled. If you want specific medical treatment in the case of a terminal illness, setting up advanced medical directives will leave instructions for your healthcare team in the event you can’t relay the information yourself. The advance medical directive may also designate someone as a healthcare power of attorney. This person is empowered to make medical decisions on your behalf in the event you are not able to.
If you have any questions about these four common estate planning documents—or any other part of the estate planning process—a financial advisor from Good Life Financial Advisors of NOVA can assist you. Contact us today!
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.