Even though the term itself can sound lofty, estate planning isn't just for the wealthy. It's certainly not as fun as planning a vacation, but it's definitely more important. Just like buying life insurance, this is a very personal process, so you may want to work with someone who can take a look at your individual situation. During the process, you'll decide what should happen to your assets, such as the money in your bank account(s), life insurance, pension and/or 401(k), home, cars and personal belongings.
Why do I need an estate plan?
You've worked hard your whole life, and you should have a say in what happens to your property, to your money and even to yourself. An estate plan outlines what will happen to your house and your bank accounts after you pass. It also outlines how you'd like end-of-life care to be administered.
What goes into an estate plan?
Many say there are four main pieces of a solid estate plan.
Your last will and testament
If you have money and/or other assets you'd like to leave to your family or specific charities after you're gone, it's important to put it all in writing. A will details who your beneficiaries will be and what they will receive. An estate planner can help you set up the details of those transfers in such a way that can help the beneficiary minimize any exposure to certain taxes.
Without an estate plan, your state's specific laws will determine the division of your assets. Generally, though, the order of property distribution goes: your spouse and children, your parents, brothers and sisters, then nieces and nephews.
When it comes to leaving property or money behind for family, you may be allowed to bestow certain amounts before your beneficiaries get hit with an estate tax. Sure, that may sound like a lot of money, but once you start looking at property values and other possessions, it can add up fast. Using a trust generally enables you to reallocate assets considered as your personal property as property of the trust and, such property is treated differently for tax purposes. Setting up a trust can help you protect your heirs' inheritance.
Power of Attorney
This is a person that you appoint to act on your behalf to make financial decisions when and if you ever become incapacitated.
Much like your financial power of attorney, you can also designate someone to make medical decisions for you if you are unable to make them yourself. You can also make decisions about how you wish to be cared for if you become unable to care for yourself or what you'd like to happen if you're put on life support.
So, as you can see, an estate plan can be a complex but very necessary document. There's plenty of help out there, so you don't have to tackle planning alone. Once completed, it will certainly give you peace of mind.
The information mentioned in this article is for informational purposes only, is intended to provide general guidance and does not constitute legal or tax advice. Each person's situation is unique and may materially differ from the information provided herein. You should seek the advice of a financial professional, tax consultant and/or legal counsel to address your specific needs before any financial or other commitments regarding the issues related to your situation are made. Popular Bank does not make any representations or warranties as to the content contained herein and disclaims any and all liability resulting from any use of or reliance on such content.