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When you pass away or if you ever become too physically impaired to communicate your wishes, your family may have to make difficult decisions on your behalf. They might have to figure out what to do with your assets, who will care for any young children you may have and how to manage your medical care.
By estate planning when you’re still in good health, you can help ensure that these key decisions are made according to your wishes. The process can also help your loved ones avoid unnecessary disagreements about what you would have wanted.
An estate plan is the process of anticipating and managing the financial, medical and guardianship issues that will arise after your death or incapacitation. It typically involves drafting a will that outlines how you’d like your assets to be managed and distributed after your passing. The plan may also address who will care for any children who are still minors and stipulate which medical interventions you wish to receive if you become terminally ill or severely injured.
Often, there’s a perception that estate planning is only for affluent individuals or those who are older. However, preparing legal documents that express your financial and healthcare wishes is important for anyone, regardless of your net worth or age. Formally expressing your intentions can help eliminate unnecessary tension between family members, as well as the need for court involvement in decision-making.
A comprehensive estate plan addresses several potentially complex legal and financial issues, so you should consult with an estate planning attorney who specializes in this area. You may also want to include your financial and tax professionals in the process.
Once you’ve established your estate plan, it’s important to regularly review and amend it where necessary — especially if you’ve gone through a major life event. Perhaps you experience a divorce that alters your financial considerations. Or maybe you change your mind about which medical interventions you want in the case of an emergency.
Many people think an estate plan deals exclusively with financial assets. But that’s only a part of it. The most basic estate planning documents should include:
Also known as financial power of attorney (POA), this person will handle your property and financial matters if you're unable to do so yourself. For example, if you have a health emergency or accident, this person could pay your bills or manage other financial considerations on your behalf.
Your healthcare POA is someone you designate to make medical decisions on your behalf if you're unable to do so. If you’re moving away from family for the first time, you may want to designate someone who lives near you and can more easily communicate with the medical team. Depending on the state where you live, this role may have other names, such as a healthcare agent, healthcare attorney-in-fact or patient advocate.
Wills stipulate how you want your assets distributed after you die. A will can also include other information, like who you’d want to care for your children if they’re still minors. Having a will typically makes the process of administering your estate, known as probate, much simpler. If you die without a will, or “intestate,” the local court has to take a much more active role in settling your estate, and may make decisions that don’t align with your intentions.
An advance directive provides instructions for your end-of-life care when you’re unable to communicate your wishes. The document specifies whether you want medical staff to perform life-sustaining measures such as cardiopulmonary resuscitation (CPR). You can also clarify other desires, like whether you want to be an organ donor.
When it comes to your financial assets, a trust can offer potential benefits that aren’t available with a will. Trusts give you greater control over how your assets will be distributed and can even help you reduce estate taxes if your net worth exceeds the federal or state limit. You must designate a trustee to oversee the distribution of assets, which can be an individual, a financial institution, or both.
In addition to the steps mentioned above, consider preparing the following documents to help make the administration of your estate go smoothly.
An estate plan helps your loved ones navigate a range of complex issues down the road. Drawing up the appropriate documents now can provide important benefits, such as:
An estate plan is an important part of the legacy you want to leave behind and will help ease things for your loved ones during a difficult time. Establishing an estate plan now, and updating it regularly, will help bring peace of mind.
The cost of preparing an estate plan depends on the number and complexity of the documents the estate planning professional has to prepare. The cost of living in your area and the attorney’s experience level are also important factors that may affect how much you pay. Estate planning attorneys may charge a flat fee per document or an hourly rate.
According to the National Council on Aging, working with an estate planning attorney to create a will generally costs up to $1,000, while setting up a living trust can typically cost up to $3,000. Plus, you may pay more to have an attorney update these documents over time.
Alternatively, you can create your own estate planning documents for much less through online legal services, although you won’t receive the personalized advice you would get from an attorney.
A comprehensive estate plan ensures that your wishes are carried out when it comes to the distribution of your assets, the guardianship of young children or your final arrangements. It can also help avoid protracted court proceedings, as well as family disagreements, after your death.
An estate plan helps your family avoid disputes about what your intentions were. An estate plan also helps your loved ones carry out your wishes if you should become medically incapacitated.
Estate planning involves the creation of legal documents that clarify your wishes when you die or become unable to make your own decisions. Often, it includes a will, an advanced directive, a property power of attorney and a healthcare power of attorney. It may also include a trust if you have complex financial needs or want to manage any tax issues that may arise after your death.
An estate plan is a multifaceted process that helps ensure your wishes are carried out after your death or incapacitation. A will, which is a legal document that specifies how you want your assets distributed after your passing, is a key part of an estate plan. However, estate planning usually involves other documents, including property and healthcare power of attorney documents, trusts, and an advanced directive for end-of-life care issues.
Learn about trust and estate services at U.S. Bank.
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