No one likes to think about their own death. There's more than enough to worry about without having to stress out about that. It would be nice if we could live as if we were immortal, never having to worry about what will happen after we're gone.
But death is inevitable, and we all need to plan for it. Even if you don't have a family to care for, not making a will can cause many problems for the friends and loved ones who survive you. Making your wishes known in advance, however, will ensure that your assets go where you want them to.
Estate planning means planning what happens to all of your assets when you die, and what happens to you if you become incapacitated. Most estate plans include
- a will
- an assignment of power of attorney
- a health care proxy
- a trust, possibly
Almost everyone is familiar with wills. A will, often referred to as a last will and testament, is a legal document that makes sure your wishes regarding your possessions are carried out after you die.
Power of attorney and health care proxy both allow someone you trust to make decisions on your behalf. Power of attorney gives someone the ability to manage your financial affairs, and health care proxy -- or medical power of attorney -- gives someone the power to make decisions about your medical condition if you're unable to do so.
Trusts are a way of passing on money and other assets to heirs. In many ways trusts are more hassle-free than wills. They don't have to be processed in court, and therefore, avoid many costs and delays. They also get around some of the high taxes that can be attached to an inheritance.
Read on to find out how each element of an estate plan works.