Many assume that drafting a will covers all a family’s estate planning needs. While a will is an integral part of the plan, experts recommend using additional estate planning tools. These can help better ensure that the estate is transferred smoothly and effectively while accommodating your family’s needs.
Essential parts of an estate plan
Each estate plan’s circumstances are unique, but those drafting an effective one often find these estate planning tools useful:
- A will or trust: These detail the distribution of assets according to the wishes of the decedent (deceased). Trusts can be useful to maintain the estate’s integrity and provide for loved ones unable to care for themselves or address many other specific needs.
- Beneficiary designations: Those assets not included in a will (such as an insurance policy or 401 (k)) need to have a specific beneficiary, or it is left for the court to decide.
- Letter of intent: These can outline funeral plans, special requests or what is to be done with a specific asset after death.
- General power of attorney: This designates a person to act on your behalf if you are sick or can no longer manage your affairs effectively. Typically, this involves handling assets, running a business and financial transactions. It can be an adult child, but there may be others better suited to handle the obligation. There can also be a specific or limited power of attorney to handle something for a limited time or scope.
- Medical power of attorney: This person oversees critical medical decisions if the primary is not mentally or physically able to do so for themselves.
- Guardianship designation: This identifies the person who will care for children too young or unable to care for themselves.
There are a number of other products that can be wise investments. These include insurance products like life insurance, which can be used to pass money to beneficiaries without going through probate, and long-term care insurance. Some also use lifetime annuities to generate income up until their death.
Smart planning avoids disputes
A well-considered estate is a parting gift to loved ones. It enables the decedent to decide how to handle matters upon their death. This avoids unnecessary disputes between loved ones and decisions made by judges based on the laws here in Colorado rather than your specific wishes.
Attorneys can also guide the family
A knowledgeable attorney with a background in estate law can be a tremendous help in addressing the needs of the client and the family. They can help draft the arrangements, but they can also help families execute these plans when the time comes.