Estate planning ensures your property and possessions are distributed according to your wishes after you die. It’s not just for the wealthy – anyone with any assets or dependents can benefit from an estate plan. When it comes to estate planning, a variety of tools are available to help you protect your assets and ensure that your loved ones are taken care of after you’re gone.
Here are some of the most commonly used estate planning tools:
1- Wills
A will is a legal document that outlines your wishes for how your property and possessions should be distributed after your death. You can use a choice to designate a guardian for minor children, appoint executors to manage your estate, and more.
2- Trusts
A trust is a legal entity that can hold assets on behalf of another person. There are many different types of trusts, but they all share the common purpose of protecting and managing assets for the benefit of the trust’s beneficiaries. Some of the types of trusts include:
- Living trusts: A living trust is created during your lifetime and can be used to manage your assets during and after death.
- Testamentary trusts: A testamentary trust is created after your death, according to the instructions in your will.
- Irrevocable trusts: An irrevocable trust is a type of trust that cannot be modified or dissolved without the consent of all parties involved.
- Charitable trusts: A charitable trust is an irrevocable trust used to provide financial support to a charitable organization.
3- Powers of attorney
A power of attorney is a legal document that gives another person the authority to make decisions on your behalf. There are two types of powers of attorney:
-Durable power of attorney: A durable power of attorney remains in effect even if you become incapacitated.
-Revocable power of attorney: A revocable power of attorney is a legal document that allows a person to give another person the authority to act on their behalf. The person who gives this authority can revoke it at any time.
4- Living wills
A living will is a legal document that outlines your wishes for medical treatment if you become incapacitated and unable to communicate your decisions. A living will specify the medical treatments you do or don’t want to receive, such as life-sustaining measures.
5- Healthcare directives
A healthcare directive is a legal document that appoints someone to make healthcare decisions on your behalf if you cannot make those decisions yourself. A healthcare directive can also express your wishes for medical treatment if you become incapacitated.
6- Beneficiary designations
Beneficiary designations assign ownership of assets, such as life insurance policies and retirement accounts, to another person. When you name a beneficiary for an asset, the ownership of that asset transfers to the beneficiary upon your death.
7- Transfer on death (TOD) designation
A transfer on death (TOD) designation is a legal document allowing you to designate a beneficiary for your property, such as your home or bank account. With a TOD designation, the ownership of your property transfers to your designated beneficiary upon your death.
Estate planning is vital to protect your assets and provide for your loved ones after you’re gone. Many other estate planning tools are available, so it’s essential to choose the right ones for your needs.
