No matter your age or how much wealth you have, you must have an estate plan in place to protect your assets. Your estate plan also protects your family, as it will continue to provide for them after you are gone. Components of your plan can even protect you in the event of incapacitation.
In order for your plan to have the biggest positive impact, it must contain a few essential components. U.S. News & World Report recommends that every person include the following when estate planning.
Last will and testament
Wills are the cornerstone of estate planning. While trusts also serve an important purpose, you must have a will in place to provide instruction on how you want your assets to be distributed. If you do not have a will in place, the state will decide how your assets are handled. It is also recommended that you review your will every three years to ensure it continues to meet your needs.
Health care proxy and living will
While a will protects your assets, health care proxies and living wills protect you. A health care proxy designates a person to act on your behalf in case you are unable. This person can make medical decisions regarding end-of-life treatments and other important matters. A living will is a document that spells out your decisions precisely, which gives your health care proxy a road map to work from.
Retirement plans and life insurance policies work differently than other assets. Instead of including directives about these assets in your will, you must complete the beneficiary designations associated with them. Designations provide information on who should receive the proceeds after you are gone, and they override information contained in your will. This highlights the importance of updating designation throughout your life, which prevents your assets from going to the wrong person.
Estate planning can be complicated, and it is easy to make a mistake or oversight during the process. That is why professional assistance is recommended. While DIY estate planning saves you money in the short-term, it could cost your family dearly.