The importance of estate planning cannot be overstated. Many people do not realize how much they have in assets, or how making some important decisions now can help your loved ones immensely in the future. Your estate plan will be unique to your needs and goals. So, what components will be part of your comprehensive estate plan?
The basic building blocks
For most people, the most common foundation for a comprehensive estate plan is a will. In this document, you can spell out how you want your estate to be distributed upon your death, and you can also include other details as well, such as funeral preferences or, for those with minor children, who you would like to have designated as a guardian, if necessary.
For some people, trusts can also play an important role in an estate plan. If you include a trust, there may be certain tax advantages for your heirs and beneficiaries, and you may also have a better system in place for the transfer of assets such as real estate, life insurance policy payouts or specific bequests, for example.
Lastly, the other common building blocks for a comprehensive estate plan are power of attorney documents. These are usually broken into two components: a durable power of attorney and a health care proxy. A durable power of attorney is used to designate someone to be able to make important financial decisions on your behalf, particularly if you are incapacitated and unable to make those decision on your own. A health care proxy is someone who is designated to make important health care decisions for you, and who is permitted access to your healthcare records. These designated individuals do not need to be the same person.