But an estate is more than everything you own, it's also everything you owe. Your estate will need to take care of your mortgage and other major debts before your beneficiaries get what you've left aside.
We'll discuss how best to distribute your assets and what happens if you pass away in debt below.
When people talk about estate planning, they're usually referring to asset distribution. In other words, they're talking about how your wealth, assets, pensions, and more will be gifted to your heirs after you pass away.
But an estate plan is a bit more than that. In addition to determining who you'd like to give your money and property to, you should also be thinking about your healthcare decisions in advance. For example, some people have strict religious beliefs about being resuscitated or might not want to take certain drugs for personal reasons. Your estate plan can and should deal with these issues so that your loved ones don't have to.
An estate plan is made up of a handful of very important documents, each with a different and unique purpose. As we mentioned above, some of these estate planning documents let you choose what sort of care you want to receive in the hospital, while others can set up trust funds for your children or decide who will run the family business.
We'll discuss these in more depth later, but here's an overview of the most popular estate planning documents:
A Last Will and Testament lets you choose who inherits your assets, select guardians for your children, and name an executor to make sure your wishes are carried out. It's the most important part of an estate plan.
A Living Will, on the other hand, will let you decide the sort of care you want if you're hospitalized and can't make decisions for yourself. For example, some people have strong religious beliefs about being resuscitated and may choose to note those in their Living Will.
A Healthcare Power of Attorney concerns the same medical treatment issues, but instead of laying out your choices in a document, you name another person to make those decisions for you. Generally, this is a spouse, family member, or close friend.
A Financial Power of Attorney also lets you choose a trusted agent to act on your behalf, only instead of making healthcare decisions, this person will be handle your finances. For example, you can give them specific access to accounts to help make sure your bills and mortgage stay current.
A Trust allows you to set aside money and other assets for people or organizations (usually charities). These accounts do not go through probate, which can be a long, drawn out process. That means your heirs will be able to inherit what you want them too, faster, and without nearly as much hassle.