The COVID-19 pandemic forced us all to reckon with our mortality—perhaps sooner than we would have preferred. Though it’s a difficult topic to broach, planning an estate is a necessary endeavor that will save time and stress for your family members and other beneficiaries. If you haven’t begun yet, get started on these five important components of estate planning.
Perhaps the most important part of any estate plan is a will, which should designate not only who shall inherit various assets but also lay out other familial responsibilities. If you have children who are not yet adults, your will should specify who will hold legal guardianship over them in the absence or incapacitation of your spouse. Wills must pass through probate proceedings in which the court affirms the validity of the document before beginning administration.
Setting Up Trusts
When we hear the words “trust fund,” our imaginations conjure up children of generational privilege and wealth, probably playing golf or polo. Trusts, however, are important assets for everyone when it comes to estate planning. A revocable trust, in which a grantor names oneself as the primary trustee and others as secondary trustees, allows assets to bypass the often-complicated process of probate.
Power of Attorney
If you become incapacitated or a court finds you to be mentally incompetent, you will no longer be able to conduct business regarding your estate. To avoid a drawn-out process in which you have no input, act preemptively by designating a spouse, relative, or associate with power of attorney. A person with POA can make the same decisions you would make regarding real estate and other assets.
Letter of Intent
While a letter of intent is not a legally binding document, it’s still among the most important components of estate planning, as it acts as an important supplement to your will. By further elaborating upon your wishes for the distribution of assets, a letter of intent can help guide a will through probate. A letter of intent may also specify wishes for funeral proceedings (or a lack thereof) and detail the distribution of personal belongings that were not included in the will.
Don’t Forget About Retirement Accounts
If you were wise enough to set up an IRA many years ago, your modest contributions over the years should have grown considerably since you established the account. If you don’t plan on exhausting the funds you’ve accrued through your sound investments, you may wish to pass on the money in that account to help build generational wealth. An inherited IRA, also known as a beneficiary IRA, can be quite a valuable legacy. When transferred to a spouse, assets can continue to grow with deferred taxation, either by simply changing the owner of the IRA or by rolling it over into another account. Some people may wish to designate a charity as the beneficiary of the IRA.