The majority of people avoid talking about estate planning. After all, it can be unsettling to consider your mortality and what you want to happen to your finances after you pass away. However, it is crucial to complete your estate planning to ensure that your assets go to the people you want them to. Here are the four fundamental components of a successful estate plan, which should provide peace of mind if you are new to estate planning.
Four components of an estate plan
1. The main component of an estate plan is “Trust.”
The different elements that should be addressed in estate planning can make it appear like a complicated procedure. However, there are four elements that your estate plan must unquestionably include for it to be comprehensive. Here are the four components you need to make sure you have.
A living trust, also referred to as a revocable trust, functions similarly to a will in that assets are transferred to designated beneficiaries after your death. On the other hand, a living trust differs in that it can be amended without having to go to court and obtain the court’s approval of the changes. Instead, the person who established the trust is the initial trustee who manages those assets for the beneficiaries.
Many people prefer to have a will and living trust in place simultaneously so that any assets not covered by the faith can still be passed on to their chosen beneficiaries. You require trust to manage your assets, whether you are still alive. This legal entity is established through a trust agreement, which gives you control over how your assets are utilized, who has access to them, and when they are made available.
2. A Will
The document that most people probably connect with estate planning is a will, which directs the distribution of your possessions after death. The probate process is necessary for a choice to become effective and occasionally takes a while. Estate planning is impossible without a will; if you pass away without one, California’s intestate succession laws will be used to disperse your possessions. To distribute assets according to your wishes, you must include them in your estate plan.
A will enables you to specify who will get what, but a trust allows you to manage your assets. For example, almost all estates in Iowa must go through the probate process. So having your wishes in a will can help ensure that your beneficiaries receive your assets according to your preferences.
3. A power of attorney over finances
You will probably want someone to be in charge of your financial decisions if you become disabled and unable to make decisions for yourself. By executing a durable power of attorney, you can designate someone who will receive such authority if you pass away. A financial power of attorney will manage your finances if you become incapacitated. You can choose who the beneficiary will be through estate planning. You can grant them the right to manage your assets.
4. Power of attorney for health care
The section of your estate plan, also known as medical power of attorney. Delegated to a specific individual, the authority to make medical decisions on your behalf. Similar to a general power of attorney that only uses if you are incapable of making medical choices. Suppose you become disabled and diagnosed with a life-threatening illness and need specific care. Then, an advanced healthcare directive can use to specify your wishes.
You can decide whether or not you wish to undergo specific therapies to prolong your life. A healthcare power of attorney has the legal ability to make medical decisions on your behalf. Suppose you cannot do so, just like a financial power of attorney does. By putting all these things in place, you can secure your estate and continue to support your family after you.