One of the most confusing and hard to execute elements of a solid financial plan is the estate plan. From the complex legal documents to the challenges of maximizing the benefits left to heirs, and the personal relationships that must be considered, estate planning is no easy task.
To help make the process seem less daunting, we list the five key components of a good estate plan.
Last Will & Testament
The first step in the estate planning process should be creating a last will and testament – a document that lays out who you’d like as the guardian of your minor children, who you want to take over your assets after you pass, and who you wish to be the executor of your will (a person you trust who will ensure your assets are properly distributed).
Trusts are legal arrangements that hold assets on behalf of your beneficiaries. When you set up a trust, you can dictate exactly how and when your beneficiaries will receive the assets included in the trust. There are different types of trusts:
- Revocable trusts – help your beneficiaries avoid probate.
- Irrevocable trusts – help limit the exposure to estate taxes.
- Testamentary trust – set up as a part of your last will and testament *The assets are NOT exempt from probate.
Power of Attorney
Power of attorney is a designation that allows an individual to make financial decisions on your behalf should you become incapacitated. Because a spouse would automatically be given power of attorney, this document is especially important if you are not married.
If you do not have a power of attorney designated and are single, a court will decide who should serve as your guardian. Unfortunately, the court will often choose someone that you may not have wanted to hold this position.
Also known as “healthcare power of attorney,” healthcare directions handle your medical decisions should you become incapacitated. There are two main documents in this category:
- Living Will – a written statement that provides instructions for your healthcare should you become incapacitated
- Healthcare Proxy – the designation of a person who will make the medical decisions on your behalf if you become incapacitated
Healthcare directives are incredibly important to ensure your wishes are carried out, especially if you believe that your family members will disagree about your care.
Beneficiary designations dictate who will receive benefits when you pass and are commonly found on retirement accounts and life insurance policies. It is extremely important to note that beneficiaries supersede what is in your will, so all beneficiaries should be reviewed regularly.
Estate Planning at Maggi Tax Advisory & Financial Planning
At Maggi Tax Advisory and Financial Group, we will guide you through the complex process of estate planning to avoid probate and ensure your wishes are properly carried out. To learn more about our established financial services firm or to schedule an appointment, please contact our Hillsborough office at (813) 850-0131 or our Pinellas/Pasco location at (727) 351-6168.