When you hear estate planning, what comes to mind?
Well, don't be too hard on yourself when it only brings up the image of you putting up a house. You will not be alone in this regard.
Estate planning is not the process of building a house, but if the house analogy is what will make it stick, then think of it as the process of protecting or securing all that you have built or own, including the preservation of your legacy, life and your wishes after your death.
And before you say you have no estate so you do not need to worry about these yet, I will urge you to think again, because a comprehensive estate plan goes beyond the protection and disposition of your physical assets to the decision that should be made concerning your health care in the event that you are unable to articulate your own wishes due to mental incapacitation, including what should be done when you die or your burial wishes and arrangements.
So what are the components of a comprehensive estate plan?
Essential Components of an Estate Plan
There are 2 main components of an estate plan:
- Health Care Plan - Who will make decisions about your health when you can't make them and what your wishes are
- Estate Disposition Plan - How your wealth must be disposed and who must handle the process.
The Health care planning decision is contained in what is called a Health Care Proxy document whiles your estate disposition can be handled in three main ways, each with its associated documentation:
- Wills or Testamentary Trusts - May be challenged, contents are public. Spells out how your assets should be disposed when you die or who has rights over each of the assets you own.
- Joint Ownerhsip & Beneficiary Designations - Avoids the probate process of confirmation somewhat, if not entirely and passes on assets to intended recipients
- Tools of Transfers - such as Life Insurance, Foundations and Trusts with added protection from unintended claimants.
The details and availability of these tools vary based on the laws applicable to your situation.
Watch these two videos below by Life Law LLC for a comprehensive introduction to the components of an estate plan.
The components and principles presented here are generally universal, it is the nuances of the laws within your jurisdiction that will vary and so remember to work with a lawyer that is familiar with the laws that apply to your situation.
Which tool is or is not available where you live? What challenges have you encountered with estate planning? Share by commenting below so others can learn from your experience.