A guide to the elements of an estate plan to protect your family
Birth, death, marriage or divorce … these life events are usually the catalysts for creating or updating an estate plan. But around this time of the year, there is another reason for Americans to revisit their estate plans: A child’s graduation from high school or college. When children are young, one of the functions of an estate plan is to name a guardian for minor children. After children are old enough to live alone, estate plans should be rewritten to focus on whether and how to distribute assets to grown children.
Only about four in 10 Americans have estate planning documents, according to a survey of 1,003 adults conducted for Caring.com.
There is more to an estate plan than a will. Many Americans meet with an attorney, CPA or CERTIFIED FINANCIAL PLANNER™ professional to discuss their goals, and how an estate plan can help ensure they are met.
In the latest contribution to LetsMakeaPlan.org, CFP Board offers a list of the elements of an estate plan:
- Will: Ensures assets are passed to designated beneficiaries, in accordance with your wishes. In the drafting process, you name an executor, the person or institution that oversees the distribution of your assets. If you have minor children, you need to name a guardian for them.
- Letter of Instruction: This may appoint someone who will ensure the proper disposition of your remains. This sounds creepy, but it’s important if you choose a method of internment contrary to your family’s tradition.
- Power of Attorney:Appoints someone to act as your agent if you are incapacitated. That person can act for you in a variety of circumstances, like withdrawing money from a bank, responding to a tax inquiry or making a trade.
- Health Care Proxy: Appoints someone to make health care decisions on your behalf when you lack the ability to do so.
- Trusts: Revocable (changeable) or irrevocable (not-changeable) trusts may be useful, depending on your family and tax situations. In 2017, the first $5,490,000 of an estate (twice that for married couples), is exempt from federal estate taxes. If an estate is above the threshold, you may want to consider a trust.
One of the best graduation gifts Americans can offer their children is a well-planned estate, prepared with the help of a CFP® professional. Instead of untangling a mess when you’re gone, your heirs can follow concrete steps that you have documented, allowing them the time and space to mourn.
ABOUT CFP BOARD
The mission of Certified Financial Planner Board of Standards, Inc. is to benefit the public by granting the CFP® certification and upholding it as the recognized standard of excellence for competent and ethical personal financial planning. The Board of Directors, in furthering CFP Board’s mission, acts on behalf of the public, CFP® professionals and other stakeholders. CFP Board owns the certification marks CFP®, Certified Financial Planner™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.CFP Board currently authorizes more than 76,000 individuals to use these marks in the U.S.
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