If you don’t have an estate plan and you want to start one, you will probably begin by writing a will. In your will, you can name beneficiaries and the assets you want to leave to them. You could say that your first-born child gets the family home, for example, while your second child gets your investment portfolio. It’s up to you how you want to divide your assets.
It is good to write a will, but it may not be enough. There are some other estate planning tools you can use to accomplish more complex goals that may be beneficial for your family. Let’s look at two examples below.
Powers of attorney
First of all, you can use powers of attorney to choose an agent. This agent is legally allowed to make certain decisions on your behalf.
For example, if you’re incapacitated, someone still has to pay the bills and access your financial accounts. You can give them this ability by using a legal power of attorney. Additionally, someone may need to make medical decisions on your behalf and work with doctors to decide what type of treatment you should receive. You can give them the legal ability to do this using a medical power of attorney.
Setting up a trust
Next, you can distribute your assets by using a trust, rather than your will. An example of this could be a discretionary trust. You tell the trustee that they are in charge of when your beneficiary can withdraw the money and how they can use it. The trustee then helps to direct them, perhaps preventing your beneficiary from frivolously spending the inheritance. You can tell the trustee that you would rather the money be used for more important things like buying a house, starting a business or paying for a college education.
As you can see, a more extensive estate plan can give you more control. Take the time to carefully consider all of the options at your disposal.
