We don’t like to think about our mortality, but we will inevitably die someday. Many of us have loved ones, and we worry about what will happen to them when we are gone.
Many believe a will is sufficient for their needs. However, a comprehensive estate plan can offer so much more when it comes to the distribution of your assets and ensuring your family’s financial future.
The importance of an estate plan
A will specifies how your assets should be distributed after your death. An estate plan considers various circumstances. It is a set of legal documents that outlines your wishes regarding your assets, healthcare and care of dependents if you become incapacitated or pass away.
A will only take effect after your death and doesn’t provide any guidance if you become incapacitated due to an illness or injury. A power of attorney allows you to appoint someone to manage your financial affairs if you are unable to do so. A healthcare directive outlines your wishes for medical treatment if you cannot communicate them. You can also appoint a healthcare proxy to make medical decisions for you.
Your estate plan can also help you avoid probate, a court-supervised process of authenticating your will, paying debts and distributing the remaining assets to your heirs. A will may need to go through probate, which can be a lengthy and costly affair. Setting up a revocable trust allows you to avoid probate, as the assets in that trust are transferred directly to your beneficiaries upon your death. Also, naming beneficiaries on investments, retirement plans and life insurance policies allows their distributions to skip probate.
While a will is a good starting point, a comprehensive estate plan offers protections and advantages that a will alone can’t provide. It allows you to plan not only for your death but also for your incapacity. It also offers ways to avoid the probate process. Both can minimize the potential stress and confusion for your loved ones.