Estate planning is a necessary process to determine what happens to your wealth and belongings after you die. An estate plan can also lay out your wishes regarding end-of-life care and establish guardianship of adults with special needs or elderly people. But it can be confusing to know exactly what type of documents you need to cover all your bases.
Every estate plan is different. Yours may be simpler or more complex than others. But there are still some essential documents and actions that everyone should consider.
1. A will
Of course, every person should have a last will and testament. This is a vital component of any estate plan, whether you have few assets or significant wealth. A will ensures that your beneficiaries receive your property and money according to your desires. Your will must be created in accordance with state laws and contain specific wording to leave no room for interpretation.
There are a lot of different types of trusts that can be beneficial for certain estates. If you have a sizeable estate, you may want to consider setting up a revocable trust, which means you can change it as long as you are alive. A trust is useful for avoiding estate taxes and passing assets outside of probate.
3. Durable power of attorney
Not all estate planning documents determine what happens after your death. What happens if you develop a terminal illness or get into an accident that incapacitates you? You can appoint an agent through a durable power of attorney to act on your behalf. When you designate someone with a durable power of attorney, you give this individual the authority to make certain decisions for you, usually relating to financial and real estate transactions.
This is just a quick look at some of the most essential aspects of most estate plans. There are plenty of other documents that may be useful for you. For example, TIME Magazine lays out a checklist of 24 estate planning documents.