6 Important Components of Estate Planning
Basic estate planning is something that everyone should do, regardless of your age, marital status, the value of your assets, and if you’re a parent or not. According to a 2021 poll by Gallup, less than half of U.S. adults (46%) have a will that dictates what happens to their assets when they die. This statistic illustrates that more Americans should consider estate planning to help ensure their assets transfer quickly to their heirs. Other findings include:
- Americans aged 65 and older are the most likely subgroup to have a will, with just over three-quarters saying they have one. Each younger age group is significantly less likely to have a will than the previous one, including just 20% of adults under age 30.
- Additionally, upper-income Americans are much more likely than lower-income Americans to report having a will.
- There are also large differences by education and race, with greater proportions of college graduates and White Americans than college nongraduates and non-White Americans saying they have a will.
Source: How Many Americans Have a Will? Gallop, May 2021.
An estate plan may not be all you need to help ensure your assets transfer quickly. However, a formal estate plan drafted by a qualified legal professional generally includes the following:
A will- A will determines where assets that don't have a beneficiary listed will go. Everyday items listed should include your home (if paid off), cars, collections, even household items. Bank Accounts and even brokerage accounts with no beneficiary listed should be in your will and estate plan, with the terminology appropriate to these types of assets.
An ‘Executor’ of your estate- Commonly, this is a relative or friend, but a professional manager may need to be considered in more complex cases where there are substantial assets.
A Guardian for your under-aged children- If you have a young family, your estate plan should include who you would like to care for your children if both parents are deceased. Without this directive, the state of your residence decides who will be the guardian of your children. Without naming a guardian, your children may be with someone you wouldn't prefer otherwise. If a child has special needs, planning for the child's care now and after age 18 throughout their adulthood must be considered.
Medical Power of Attorney- Commonly, spouses list each other as medical power of attorney, but you have the full authority to list anyone you choose. A Medical Power of Attorney makes medical decisions for you when you’re incapacitated to do so for yourself.
Financial Power of Attorney- This individual or individuals have the authority to pay your bills and manage your finances for you if you are unable to yourself. Choosing a Financial Power of Attorney is critical if you require extended medical or nursing care so your bills are current and you can remain in the care facility. Without having a Financial Power of Attorney named, your assets are seized and liquidated by the state to pay your bills, even if you have the assets to pay.
Trust Document- A Living Trust allows you to pass assets without going through probate and allows someone else to handle your financial affairs if you're unable. A trust document names the 'trustees,' who the trust benefits, and a successor trustee who will take over when the trustees cannot manage their affairs or pass away. A Trust Document is a crucial element in estate planning.
There are different types of trusts depending on your unique situation, so it is important that you work with your financial, legal, and tax professionals to determine which is appropriate for you. Remember that estate planning can help establish that your dreams are carried out the way that is best for you, how you intended, and help your assets pass more efficiently to heirs.
Content in this material is for educational and general information only and not intended to provide specific advice or recommendations for any individual.
This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation.
LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by Fresh Finance.
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