Wills
Do you have a will? When was the last time it was updated? An up-to-date will is very important.
Your will is a legal document, usually drafted by an attorney, which specifies how, when, and to whom your assets will be distributed following your death. Your will does not have to be complicated, but it should take into consideration several items. It should:
- Specify who will receive your assets, including specific bequests.
- Name a legal guardian for your children.
- Name your executor, who will manage and administer your estate.
- Determine which assets pass immediately to heirs and which pass into trusts or other accounts to be distributed later.
- Specify any charities or organizations you would like to benefit.
Trusts
In order to accomplish specific or more complex financial goals, you may also need to utilize a trust.
A trust is an arrangement to manage distribution of an asset, whether it is a property or cash. For estate planning purposes, the asset can be transferred to a trust, which then “owns” the property, for the benefit of or eventual distribution to a beneficiary. You can establish and transfer assets to a trust during your lifetime, or you can do so through your will (called a testamentary trust).
Through the use of various trusts, you can:
- Transfer property to your heirs privately and without the cost and potential delays of probate.
- Provide ongoing income to a spouse, minor child, elderly parent or someone with special needs.
- Reduce estate taxes.
- Benefit a favorite charity.
Powers of attorney
There are two main types of powers of attorney:
- Financial powers of attorney make financial decisions and manage your assets. They dictate who will handle your affairs in the event you become incapacitated.
- Health care powers of attorney make decisions for your health care and treatment.
Living will
A living will, sometimes called an advanced directive, indicates your desired treatment if incapacitated. It will also guide your family and health care providers in fulfilling your wishes.
Life insurance
Life insurance accomplishes what no other planning tool can. It provides an instant source of income tax-free cash. Your family members can use this cash to maintain their lifestyle, pay taxes (without liquidating your assets) and carry out your estate distribution wishes.