You really don't have to be a millionaire or famous to create an estate plan, as noted in an article appearing on the Forbes' website, "Prince and Estate Planning: What We Can Learn from the Late Musician's Financial Picture." All you have to do is make sure that you have six basic estate planning documents in place to protect your loved ones from additional stress and worry when you pass away.
Here are the six key documents you should have to protect your assets and your family in the event of your passing:
- Beneficiary Forms. This indicates who gets the assets in your 401(k)s, IRAs, life insurance policies, pensions, and other financial accounts upon your death. These designations take priority over the directives in your will, so keep them up to date.
- POD and TOD Designation. A payable on death (POD) form typically says who should receive the money in your checking or savings accounts when you pass away. A transfer on death (TOD) form is similar but typically for brokerage accounts. A TOD deed says who takes over the deed to your home after you die.
- Durable Power of Attorney. This important document designates a person to make health care or financial decisions for you if you become incapacitated or unable to make them for yourself.
- Living Will. This is also called an Advance Health Care Directive. It details the way in which you want your doctors to treat you should you become unable to communicate those wishes.
- Will. This outlines how you want your probate assets divided, as well as who should become guardian of any minor children.
- A Living Trust. This document, like a will, says how you want your property and funds distributed and who will take care of your minor children. It also appoints a trustee to carry out specific wishes for your assets. Unlike a will, assets held in a trust don't have to go through probate. A trust can be used to help manage your assets and property while you're still alive.
Every situation is different and depends on your circumstances. By working with an estate planning attorney, you can rest assured that your heirs will be protected and your wishes will be carried out.
Reference: Forbes (April 29, 2016) "Prince and Estate Planning: What We Can Learn From the Late Musician's Financial Picture"