Planning for the future involves more than just saving money. Estate planning ensures that other individuals distribute your assets according to your wishes after death.
Having these documents organized can give you peace of mind.
1. Create a will
A will is a huge component of estate planning. It outlines how you want your assets distributed after your death. Without a will, state laws will determine the distribution of your estate, which might not align with your wishes. A will allows you to name an executor who will manage your estate and ensures that your assets go to the intended beneficiaries.
2. Designate beneficiaries
Beneficiary designations on accounts such as life insurance policies, retirement plans and bank accounts take precedence over a will. You should review and update these designations regularly, especially after major life events like marriage or the birth of a child. This step ensures that the right people receive the intended assets.
3. Create a power of attorney
A power of attorney grants someone the authority to make financial decisions on your behalf if you become incapacitated. This person will handle your financial affairs, ensuring that no bills go unpaid and any investments stay well-managed according to your wishes. Choosing a trustworthy and capable person for this role is important.
4. Set up an advance healthcare directive
An advance healthcare directive, also known as a living will, specifies your medical preferences if you are unable to describe them yourself. It includes instructions on life-sustaining treatments and end-of-life care. This document also allows you to appoint a healthcare proxy, someone who will make medical decisions on your behalf.
5. Organize and store documents
Organizing and securely storing all estate planning documents is key. Keep the original copies of your will, trust documents, power of attorney and healthcare directive in a safe place. Inform your executor or a trusted individual where these documents are.
Taking the time to do this task well is important. Creating an estate plan might seem overwhelming at first, but following a checklist can simplify the process.
