What Estate Planning Documents Should I Have?
Many people think of retirement planning as finding a balance between how much you need to save during your working years and how much you can afford to spend once you are retired. They may neglect to consider how their assets will be distributed upon their death or what will happen if they are no longer capable of handling their financial affairs. In this article, we’ll explore some basic concepts of estate planning.
What is Estate Planning?
An estate is the sum of an individual’s assets, property, and possessions less any debts or liabilities. Having an estate plan means having the legal documents in place to record your wishes on how your estate will transfer when you pass away. Other documents include those that spell out your wishes and grant authority to other individuals should you become unable to make decisions for yourself. There are many laws that govern estate planning documents so one should seek advice from a qualified attorney.
How Does An Estate Transfer Upon Death?
The legal process of settling a deceased person’s estate is called probate. An executor will oversee paying bills and distributing the assets as stated in the decedent’s will. If there is no will, the executor is required to distribute the assets according to law, which may vary by state. Not all estates require a court’s oversight and some types of accounts may pass directly to a beneficiary or bypass inclusion in the estate.
What are Some Common Estate Documents?
Will - A legal document that instructs how a person’s property is to be distributed after their death and appoints a person to manage the property until its final distribution.
Healthcare Power of Attorney - A legal document where an individual designates another person to make medical decisions for them in the event they are not able to make them for themself. Some may also include advanced directives, also known as a living will, that state their wishes on life-sustaining procedures they do or do not want.
Financial Power of Attorney - A legal document where an individual designates another person to handle their financial affairs during their lifetime. A “durable” power of attorney will continue even if the person becomes incapacitated. A “springing” power of attorney takes effect when an authority, such as a medical professional, determines the person is physically or mentally unable to make their own decisions.
Beneficiary Designations – Some financial accounts allow the owner to specify who will receive the account upon their passing. Such accounts include IRAs, 401(k)s, and life insurance. Bank accounts like checking, savings, and certificates of deposit may also allow a beneficiary to be listed. Accounts with beneficiaries do not need to be included in the probate process but may have forms and procedures in place for the inheritor to claim their share. If an account does not have a beneficiary listed, then it becomes part of the estate and is distributed according to law.
Start Estate Planning Today
You’ve worked hard to save for retirement and now is the time to protect it. Let Professional Financial Management’s Wealth Advisory services help you get your estate plan in order. Call us today to get peace of mind as you secure your financial legacy.