Estate planning is a crucial step in the life of every person who intends to pass on personal assets to loved ones after their death. It outlines your wishes and assets and what should be done with them when you pass away or become incapacitated.
An estate plan empowers you to pass on your assets as you desire within the legal framework. However, you need to act carefully while creating an estate plan to make sure it transfers safely and smoothly to your designated beneficiaries without any legal trouble.
Otherwise, your loved ones could deal with the agony of repercussions such as delayed probate, heavy interest rates, and others. To avoid such issues, make sure to know what to include and what to avoid in your estate plan.
What To Include In Estate Planning:
#1. Wills and Trusts
A will or a trust is the primary component of every estate planning, even in case of a lack of substantial assets. Having a legally drafted will or a trust helps you distribute your assets according to your wishes without facing legal battles. Moreover, it limits estate taxes if they comply with state regulations.
If you are unsure of how to create your will or a trust, you can manage estate planning online to get a better idea of estate planning in the best possible way. You can get an expert opinion and technical assistance to design your step-by-step will or a trust.
#2. Guardianship Designations
Picking a guardian for your minor children is a big responsibility that you must delegate to a caring and considerate person or a couple. Make sure the guardian you choose is financially stable, shares similar views, and is willing to take the role of guardianship.
In general, every estate plan incorporates a guardianship clause. But if it doesn’t, include it if you have kids or are planning to have one. Overlooking this part could affect the upbringing of your kids; the court may rule to grant guardianship to family members whom you dislike or would not have considered in the first place.
#3. Contingent Beneficiary And An Executor
It may sound convenient to appoint only one beneficiary and executor for your will or trust.
However, it’s not ideal to put all your eggs in one basket. You must have a backup plan in place if something goes wrong.
Suppose your appointed executor or a beneficiary passes away before you do. In that case, you have to make quick adjustments and alterations to your estate plan. To avoid such a scenario, designate a contingent beneficiary, executor, and guardian.
#4. Durable Power of Attorney (POA)
A durable power of attorney (POA) is a must-have for an estate plan. It allows you to nominate an agent or an individual to work on your behalf when you become mentally incompetent or face any serious medical condition.
A POA holder can make legal decisions, seal financial deals, and carry out real estate business as your representative. This power of attorney is revocable by default when the person who granted the powers resumes normal life after recovery.
A lack of POA may take the matters to court; it may decide the fate of your assets that you won’t appreciate or want. So it is best to include a durable power of attorney in your estate plan to protect your assets in the future.
What To Avoid In Estate Planning
Since there are a few things that you must ensure to include in the Estate Planning, some things are off the list. You must avoid doing the below-mentioned things to draft a comprehensive and legally bound estate planning.
#1. Inconsistent Entries Of Beneficiaries
You must consider beneficiaries carefully while creating an estate plan. One of the important factors while creating a will is to make sure what you bequeath is consistent with outside-of-will assets.
Avoid entering beneficiaries in the will if you intend to pass the assets outside of the will.
For instance, if you want to bequeath an insurance policy to your spouse, don’t pass on this asset to another beneficiary outside of your will to avoid legal challenges.
Whether you choose to pass assets outside of the will or inside, you can pass an insurance policy or a retirement plan to a single beneficiary.
#2. Omission Of Digital Assets
In this digital age, you may own a variety of digital assets, from bank accounts to social media accounts to email accounts and many more. Just like physical assets, intangible assets also hold great importance in estate planning. The omission of such assets could compromise your financial worth and damage your reputation.
You must not neglect digital assets while considering an estate plan. You can designate a digital executor, just like a will executor, to act on your wishes after you are no longer part of this world. It will secure your digital information along with protecting your wealth.
#3. Getting Too Much Specific
It is essential to consider the changing status of your assets with time while creating your estate plan. Your assets may expand or shrink in the future to meet your needs. Make room for alterations in the estate plan but avoid getting too specific.
Don’t mention those assets too specifically in your estate plan that could void upon slight change. However, you can become specific about assets that you are guaranteed to own in the future.
#4. Making Assumptions
Estate planning is a cumbersome task that requires your due attention to include all relevant details. Leaving certain things based on assumptions could lead to the transfer of assets to unwanted beneficiaries.
Understanding the terms of your pension scheme, life, or health insurance policy can save you from making unintentional mistakes. Avoid assuming that all of your assets will transfer under the terms of your will. You have to consider the nature and type of assets too.
An estate plan is a guaranteed way to safeguard your assets from unwanted beneficiaries and tax rates. With the help of professionals, you can successfully create your estate plan while meeting the legal requirements. It may sound like a troublesome affair to manage an estate plan down the line. But it’s the best thing you can do to lessen the pain of your loved ones.
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