Putting your affairs in order: What does it mean financially?
Whatever your age and situation in life, it’s a good idea to plan for the inevitable fact that one day, you won’t be around any longer. The primary reason to do this is for your loved ones. Making the right financial preparations can help ensure that they remain financially secure and that they also have the peace of mind of knowing and understanding your wishes. However, there are also elements of estate planning that help ensure your own financial security as well. Below are several points to consider.
Wills
There’s a lot more to estate planning than making a will, but creating one is an important first step. Even if you end up using other vehicles to pass most of your assets, a will can serve several important purposes. First, if you have minor children, a will is the simplest way to appoint guardians. Without this, your family could end up in stressful and costly litigation. A will is also a simple way to distribute your assets if your estate is not particularly complicated, but it can also be useful if you have a trust. What is often referred to as a pour-over will can move any remaining assets into a trust at the time of a person’s death.
Trusts
Contrary to popular perception, trusts are not reserved for the wealthy. There are nearly as many different types of trusts as there are reasons to have one, and if you consult an attorney about your estate planning issues, you might be surprised to learn that a trust could be a solution to one of your problems, whether that is concerns about a relative with special needs, worries about a financially irresponsible beneficiary, worries about a Medicaid spend-down and much more.
Life Insurance
Like many other vehicles related to estate planning, a life insurance policy can have multiple uses. In its basic form, it can provide cash for your family if anything happens to you. This can be particularly important if your income is a significant part of the family budget. However, a life insurance policy can also be a type of investment. If you no longer need it, rather than letting it lapse, you might be able to sell it for money. There are different ways to do this based on your situation. For example, viatical settlements may be available for people who have been diagnosed with a chronic or terminal illness. You may be able to use the money for treatment, a trip you want to take or anything else. You can review a guide about the benefits of a viatical settlement to learn more.
Other Financial Considerations
There are many other elements of estate planning to consider. For example, you might want to use a power of attorney or another type of document to ensure that if you are incapacitated, there is someone who can make financial decisions for you. There are also ways of passing on assets that do not involve using wills or trusts, including beneficiary designations. And options for things like beneficiaries with addiction issues that you need to be considerate of. You could also title your home or other assets so that they pass immediately to beneficiaries. It is generally best to talk to financial and legal professionals about these issues rather than trying to do it yourself to ensure that you have all the right documentation in place.
