Planning for the future is an important part of being an adult. However, you might not be sure where to start when it comes to something as big as estate planning. Maybe you are already familiar with the consent of a will, but there are also other important documents and designations to consider.
For example, sometimes having a will is not enough to correctly pass on an asset to someone else. Just because you state in your will that one person should receive the benefits of your life insurance policy does not necessarily mean that it will go to him or her. This is because the beneficiary designation on your life insurance policy takes precedence over a will. You should be sure that the person named in your will and the designated beneficiary match up.
Get a living will
A will is for what happens to your property after your death, whereas a living will is for what happens if you no longer have the ability to make your own medical decisions. This is often as the result of being in a coma, unconscious or otherwise medically incapacitated. Information you may want to include in your living will includes:
- Your feelings on life support
- Blood transfusions
- Certain surgeries or medications
This alone is not enough to ensure that medical professionals follow your wishes. You should also be sure to create at least two powers of attorney — one for health care and another for finances. The person named in the health care power of attorney can make medical decisions on your behalf while using the living will as a guide, while the individual named in the financial power of attorney can take charge of your finances until you are able to do so.
What about a trust?
Like a lot of people in Colorado, you might associate trusts with the very wealthy. However, trusts can be a powerful estate planning tool for people of all income levels. For example, you cannot actually leave property to someone who is a minor. If you still want to leave a specific asset to someone who is younger than 18, you can place that asset into a trust until he or she is older.
Age is not always a factor when it comes to creating trusts, though. Trusts are also very useful for passing on life insurance benefits without worrying about certain taxes or delays because of probate. A trust may also come in handy when leaving an inheritance to an heir who is an adult but is not very responsible with money.
Discuss your estate plan
Planning for one’s death or a medical emergency is one thing; discussing it with other people is another. Even if it feels difficult to get over the initial hurdle of talking about your estate plan with loved ones, you should do your best to broach the topic. It is not uncommon for people to get upset when they learn they are receiving a smaller inheritance than expected, but addressing the reason behind these decisions can curb unnecessary fighting in the future.
Estate planning is not something that you can tackle in an afternoon and then never think about again. As you move through life and get married, have children, divorce or start new jobs, your estate planning needs also change. This is why, after creating your initial estate plan, it is a good idea to conduct an annual review and make changes where necessary.