Adulthood brings certain financial responsibilities such as the building of budgets, bank accounts and insurance. It's surprising how few Americans consider an estate plan part of that essential mix. Preparing now for the end of your life or for illness may not sound like fun, but it’s necessary. Having a plan for the future can bring you peace of mind and put you on the road to stronger financial security.
Putting the legalities in place will make it easier for your loved ones in the event of a long-term illness or a death. Here are a few things to consider.
A will is the first step in estate planning and should be at the top of your to-do list. The provisions of your will determine who is going to inherit your property, who is chosen to become the guardian of your children and who will manage your financial affairs in the event of your death.
A trust allows you to have more control over the money you leave to someone than your will does. For example, if you leave money to a young child, it can be put into a trust and used only for education, or dispersed once a child reaches a certain age. A trust also protects the money from creditors since it cannot be taken from the beneficiary to pay debts.
Powers of Attorney
If you are unable to make legal decisions, someone will need to make these decisions for you. Deciding who this person will be in advance is called giving someone power of attorney. There are two main types of powers of attorney. A durable power of attorney gives a person, or people, authority to manage your finances and other legal affairs for you if you are not capable of managing them yourself. A health care directive is a power of attorney that allows the person you designate to make health care decisions for you if you are unable to make those decisions yourself.
A living will is a clear statement about your wishes regarding artificial life support. If you’re unable to make medical decisions for yourself, a living will directs your power of attorney in what choices to make.