What is sound estate planning?
A sound estate plan helps you protect your loved ones, assets, and yourself during your lifetime and after passing on, regardless of your age or financial status.
Many people believe that their estate planning is complete if they have a will, but there is much more to a solid estate plan. For example, a good estate plan should be designed to avoid probate, save on estate taxes, protect assets if you become incapacitated, and appoint someone to act for you if you become disabled.
At a minimum, every estate plan should contain a durable power of attorney and a will. Trusts may also help avoid probate and manage your estate during your lifetime and after. Furthermore, medical directives allow you to appoint someone to make medical decisions for you.
Do You Need an Estate Plan?
Anyone with financial assets can benefit from estate planning - it makes sure their investments are left in good hands after they pass. However, there is more to estate planning than just drafting a will. The following documents enable you to transfer your property seamlessly to your heirs upon your death. In addition, when preparing your will or trust, it's imperative to include provisions allowing your heirs access to and control assets if you become incapacitated.
What are the most critical estate planning tools in 2022?
- Last will
A successful estate plan begins with a will. You can write your own legally binding will or engage an attorney to work with you on drafting your will/trust. Ensure the distribution of your assets is consistent with your will. For example, if you listed our first daughter as the beneficiary of your crypto assets, it should be the same on your Will.
Your attorney will recommend either a will-based or a trust-based estate plan during your estate planning process.
A trust or will is a legal arrangement that protects assets and directs their use following the wishes of their owners. Trusts may be used both during and after a person's life, unlike wills, which take effect upon demise. Wills and trusts can be used separately or together for estate planning.
2. Durable Power of Attorney
A power of attorney is a legal document that appoints someone to act on your behalf. The person is known as the agent or attorney. Because they will generally be able to sell, invest, and spend your assets, you should choose this person carefully.
When a person becomes incapacitated or dies, an ordinary power of attorney terminates. Meanwhile, a durable power of attorney can continue to function and provide financial security in the event of incapacity. A durable power of attorney will expire upon death.
3. Health Care Power of Attorney
A durable power of attorney for health care allows someone to make medical decisions for you if you are incapable of doing so. A living will and this document will reduce the likelihood of a family conflict or court intervention if you cannot make your own health care decisions.
4. Revocable Living Trust
Living trusts are not necessary for everyone, even though most people need a will. First, you transfer your property into a living trust, making it more complicated than a will. When the property is transferred, you become the trustee (naming someone to succeed you upon your death). The successor trustee then distributes your assets following your wishes. A living trust best serves people who own many property and assets. A living trust can also be modified whenever necessary.
5. Living Will
Living wills, also known as advance healthcare directives, are legal documents that provide instructions for end-of-life care. Living wills are sometimes confused with last wills and testaments, but each document serves a different purpose.
In a living will, you specify how life-sustaining treatments should be administered if you are incapacitated and are unable to communicate. Instead of leaving it up to your grieving family members, this is a decision you should make ahead of time.
6. Letter of Intent
Simply put, a letter of intent is a document that is left to your executor or beneficiary. It specifies what should happen to a particular asset after your death or incapacitation. In some cases, it will provide funeral details or other special instructions.
Although a document like this is not legal, it informs a probate judge of your intentions and may be helpful in the distribution of your assets in case your will is deemed invalid.
7. Beneficiary Designations
Many of your possessions can pass to your heirs without being dictated in your will (e.g., retirement accounts like the 401k plan). You need to assign a beneficiary to such accounts, and a contingent beneficiary or trusted helper should be included in an insurance plan. Naming beneficiaries may help distribute your wealth.
8. Designations of Guardianship
Picking a guardian is incredibly important when you have children or consider having children. You must choose an individual or couple who shares your views, is financially secure, and is genuinely interested in raising children. Additionally, a backup or contingent guardian needs to be named as well.
9. Assets and Liabilities Tracker
In a world where our devices hold our most sensitive information, it is necessary to consider how to deal with 'digital assets' after death. To be sure that your digital account information can be accessed in the event of your death or incapacity, make sure you've already stipulated how and to whom it can be accessed.
Cova is an important assets tracking tool that should be included in your estate planning. Here’s everything you can do with Cova:
- You can track and organize everything you own an owe in one place. I.e. your assets and liabilities, which makes it easy for your loved ones to find our assets if the unexpected happens.
- Cova is borderless and international: this means your can track your assets across multiple currencies and countries.
- Cova helps you manage your beneficiary designation. With the beneficiary feature on Cova, you can assign a beneficiary to your assets on Cova who receives your assets records if the unexpected happens. Even though Cova cannot replace a will, it can be very useful where a will is not present.
- Cova tracks both traditional assets like real estate, arts and collectibles, and digital assets like crypto, stocks, mutual funds, insurance and retirement accounts, all in one place. Cova is the single source of truth for your wealth.
- In 2022, an asset tracking tool like Cova is important for assets aggregation, and managing wealth records.
Some of the tools listed above are important to consider when planning your estate. Your estate planning attorney can help you decide what documents are necessary according to your situation.