Six Estate Planning Essentials
Glenn Curtis 08.01.07, 1:00 PM ET
Many people believe that having an estate plan simply means drafting a will or a trust. However, there is much more to include in your estate planning in order to make certain all of your assets are transferred seamlessly to your heirs upon your death. A successful estate plan also includes provisions to make sure your family members can access or control your assets should you become disabled.
Every estate plan should include a will/trust, durable power of attorney, beneficiary designations, letter of intent, health care power of attorney and guardianship designations.
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A will or trust should be written in a manner that is consistent with the way you've bequeathed the assets that pass outside of the will. For example, if you've already named your sister as a beneficiary on a retirement account or insurance policy (assets that typically pass outside of a will to a named beneficiary), you don't want to bequeath the same asset to a second cousin in the will.
It's important to draft a durable power of attorney (POA) so that an agent or a person you assign will act on your behalf in the event of your disability.
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As was touched upon earlier, a number of your possessions can pass to your heirs without being dictated in the will (a 401(k) plan, for example). This is why it is important to maintain a beneficiary (and a contingent beneficiary) on such an account. In fact, all retirement accounts and insurance plans should contain a beneficiary and a contingent beneficiary because they too typically pass outside of a will.
Letter of Intent
A letter of intent is simply a document left by you to your executor or to a beneficiary. The purpose is to define what you want done with a particular asset after your death or incapacitation. In addition, some letters of intent also provide for the details of the funeral or other special requests. (To learn about executors, see "Choose The Right Executor.")
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By drafting a health care power of attorney, you can designate another individual (typically a spouse or family member) to make important health care decisions on your behalf in the event of incapacity.
While many wills or trusts incorporate this clause, some "form" wills don't. If you have kids or are considering having children, picking a guardian is very important and sometimes overlooked. Make sure the individual or couple you choose shares your views, is financially sound and is genuinely willing to raise children. As with all designations, a backup or contingent individual/family should be named as well.
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