Estate planning is more than just writing a last will and testament and letting it handle everything after your passing. Depending on your circumstances, you may need additional tools or documents as part of your overall estate plan to help manage your assets and carry out your wishes.
These are the three most common estate planning tools you should consider.
Legal Wills
Also called the “last will and testament,” a will is a legal document that details asset divisions after death. It is likely your first choice to include in your overall estate plan as it’s most common and allows you significant freedom with specific divisions of your property, finances and other assets.
Wills are easy and affordable to set up, especially if you comply with your state’s requirements. If you have children under the age of 18 under your care and you want to nominate specific guardians, a will also helps guarantee that. Pairing this with other options, such as granting someone power of attorney to oversee your will’s execution, makes it easier to follow your wishes.
Durable Power of Attorney
Power of attorney is a special privilege given to a specific loved one so they can make decisions on your behalf if you are unable to, such as in cases of incapacity or disability. There are two kinds you can explore:
- Financial power of attorney, which helps someone make financial decisions on your behalf
- Health care power of attorney, which allows someone to make medical choices for you if you are unable to
Granting power of attorney to a trusted individual ensures that you have someone safeguarding your rights and decisions even when you cannot. It’s vital to grant this to someone you trust and know has your best interests in mind.
Trusts
A trust is an alternative to a legal will. It allows you to transfer assets according to your wishes. Depending on your circumstances, you can opt for:
- A revocable living trust, created and applicable while its guarantor is alive
- A testamentary trust, which only becomes valid upon its guarantor’s passing
- An irrevocable trust, which cannot be changed or revoked once it’s created
Trusts can help transfer assets outside of probate while giving you greater control over how and when those assets are distributed to beneficiaries. They may also offer additional privacy because trust assets generally do not pass through the public probate process.
Ensure your estate plans are in order
Estate planning tools serve different purposes, but they all work toward the same goal: helping protect your wishes, your assets, and the people you care about. Understanding how wills, powers of attorney, and trusts fit into an overall estate plan can help you make more informed decisions about your future.