What Are the Critical Components of an Estate Plan?
- November 30, 2016
- Estate and Legacy Planning
Do you need an estate plan, and what are the principle components of an estate plan? A lot of people put off their estate planning and come to me saying, “you know, Jim, I don’t have a lot of money to put into an estate plan.” Let’s be clear here, if you own something, and you love somebody, you need an estate plan. Estate plans take care of us while we’re alive, and then take care of our stuff when we pass away.
A lot of times when we think estate planning, we think of estate tax, which doesn’t affect a lot of people. The estate tax is, if you think of a pyramid that represents estate planning, the very top tent. Everything else affects most of us.
The key components to an estate plan are:
First, you need to have a will, regardless of your age, even young people. If you own something and love somebody, you need to have a will. The most overlooked thing that I see with the will is people not keeping it up-to-date. You need to be getting that thing out every five years or so and look at it. Or, if you have a major life event in your family, such as a marriage, divorce, birth or death. You need to be reviewing your will.
Also, you need a fallback executor. If you’re married, you name your spouse executor, who’s the fallback if your spouse cannot serve? What happens if you’re both in an accident? You have a fallback. You’re executor doesn’t have to live locally, either. That’s a little bit of a myth, though it certainly makes things a little bit easier.
There are your powers of attorney to take into consideration as well. There are two of them: your medical power of attorney, which is for someone to make medical decisions for you when you cannot, and your financial power of attorney, who pays your bills and administers your affairs. Those are two separate and distinctive powers of attorney. The powers of attorney take care of us while we are alive, while a will takes care of our affairs after we die.
These are just some of the aspects that encompass a comprehensive estate plan. We have an executor checklist available on our site that is free to download that can help you fulfill your executor duties.