Creating a will is a great start to your estate plan. If you have simple assets, this may be enough for you. However, more documents are often necessary to get the most out of the estate planning process.
If you want to leave your estate to your heirs in the most efficient, cost-effective and sound manner possible, you may need to consider other estate planning tools. Here are some estate planning matters you should not overlook.
A trust can be beneficial for certain estates. Whether you need a trust depends mostly on your tax situation and family needs. For example, if your estate is above the estate tax threshold, a trust may suit your needs. There are various trusts you can set up, including revocable trusts, irrevocable trusts, special needs trusts and charitable trusts.
2. Beneficiary designations
There are plenty of assets that go to your heirs outside of the traditional probate process, including the following:
- Life insurance policies
- Retirement accounts
You can transfer these assets directly to people of your choosing. Make sure you designate the right people on these documents.
3. Health care proxy
Not all estate planning tools have to do with what happens to your belongings or wealth when you die. Some are concerned with what happens if you reach a state of mental incapacity. If you suffer a life-threatening injury or illness, you may have certain desires regarding life-sustaining treatments. A health care proxy is a way to put your wishes about life support in writing.
4. Financial power of attorney
Similar to a health care proxy, a financial power of attorney is a way to plan for incapacity, except it has to do with your finances. This document allows you to name someone you trust to manage your financial responsibilities if you cannot do so on your own. With a power of attorney, you can have peace of mind about your financial affairs no matter what.