Creating an Estate Plan for your assets can be a tedious process. Some might not even consider making one. They believe that their assets aren’t valuable enough to be passed on via a will.
The significance of Estate Planning is often undermined, and it’s only following the death of an individual that people understand its importance. But with the vast array of options for Estate Planning, it’s easy to get lost without even knowing where to start.
With the help of Estate Planning tools, the process of setting up an Estate Plan becomes more streamlined and thus, less intimidating. In this article, you’ll learn about 5 essential Estate Planning Tools that can help in securing your Digital Assets for the future.
Wills are one of the first things that come into our minds when talking about Estate Plans. You see it in all the movies and TV shows. But what exactly is included in your will? And what does it include?
Your will determines what happens to your assets following your death. It contains the specifics of how your assets are to be distributed following your death.
The person who creates the will is called a testator. They can appoint an executor to carry out the contents of the will.
If someone dies without making a will for the distribution of their assets, their property is to be passed on to their legal heirs.
You can also include conditions in the will. For example, you can have it so that your assets are passed on to your beneficiary after a given time period and not immediately following your death.
Trusts are usually associated with wills and it is quite easy to confuse them for each other.
But unlike a will that states how your assets are to be passed on following your death, a trust is a legal document that involves a trustor (the owner of the trust) and a trustee (temporary holder of the assets) to hold and then pass on the assets to the beneficiary.
In a will, all of the assets belonging to the testator are included whereas in a trust, only the assets given in the trust are transferred.
A trust is usually made to cut down Estate Planning costs and delays. (Since trusts do not require probate).
Trusts can be categorized into:
- Revocable Trust – Changes can be made to these trusts or it can be entirely terminated at any time during the trustor’s lifetime.
- Irrevocable Trust – These trusts cannot be altered/terminated after it has come into action
Powers Of Attorney
While having trusts and wills are very important, they will only be carried out following your death. The people you appoint to carry out your wishes may not always be capable of doing so.
Powers Of Attorney exist so that the execution of your Estate Plan is carried out properly. This means that the people you appoint as your powers of attorney are people you have total faith in.
Powers Of Attorney can be classified into two;
Financial Powers Of Attorney
As the name suggests, a financial power of attorney is the one who handles the financial decisions regarding your assets. Not only will they guide the one handling your assets, but they also have the authority to make financial decisions in case there are any oversights in your Estate Plan.
Healthcare Power Of Attorney
While Financial powers of attorney are tasked with making financial decisions, the medical power of attorney is responsible for making important decisions regarding your medical care.
A medical power of attorney can make medical decisions for you in a case where you are unable to do so.
For example, if you’re seriously injured and are not in a condition to choose what sort of treatment you require, your power of attorney can step in as your healthcare agent to make those decisions for you.
Advance Directives, also known as a living will, is a document that contains information regarding how you are to be medically treated in the case of your incapacitation.
Your medical power of attorney (if appointed) makes decisions by carrying out the directives you have included in this document.
The last thing you want is their loved ones agonizing over what treatment methods you require in a situation where you are unable to make the decision.
By creating an advanced directive, you are reducing the burden that would otherwise have been placed on those precious to you.
Life insurance is unique in that it stands out from other estate planning tools such as Trusts and Wills. But how exactly do they do that?
Life insurance provides your loved ones with an influx of income-tax-free cash after your death that your family can use for a variety of purposes.
Digital Estate Plan
While the above-mentioned tools are meant for your assets, what of your digital assets? While digital assets might not seem as important, with the rapid digitization of many aspects of our lives, we should start thinking about what happens to our digital assets after we die.
Just like making a will for your physical estate, a Digital Estate Plan secures your Digital Assets to be passed on to your loved ones. Making a Digital Estate Plan also protects your digital assets from threats such as identity theft and hacking.
With such a vast array of tools, you are well equipped to begin your Estate Planning. Being familiar with the aforementioned tools is vital to making a proper Estate Plan for yourself. But always remember that while you’re creating the Estate Plan for yourself, the benefits are to be enjoyed by your beneficiaries.
Now that you’ve learned about some of the tools that can be used to create an Estate Plan, why not check out Clocr’s Digital Legacy plan to secure your Digital Assets for future generations.