4 Critical Elements That Your Estate Plan Should Have

Estate planning has become a critical part of your financial journey. Whether you're a high net worth individual or you own just a few assets, you shouldn't overlook the importance of this process. Estate planning involves more than just preparing a will. It is also a strategy for reducing outstanding debt, navigating probate, and establishing a trust. Here are four critical elements that your estate plan should have.  

1.    A detailed explanation of your wishes

The value of estate planning is that it gives you the freedom to communicate your wishes. Whether you want to be cremated or you've prepared a last testament for your family, estate planning ensures that specific requests are carried out after your death.

This is where a will comes in. Your will should include specific wishes, including identifying a power of attorney who will effect these wishes.  

2.    Trusts

Trusts are another critical component of estate planning. A revocable trust allows you to transfer assets to different owners, where you can control the movement of assets from one trust to another. On the other hand, irrevocable trusts act as a permanent transfer of ownership. This option is useful if you're looking to reduce your tax burden or distribute assets to beneficiaries while still alive.

3.    A plan for navigating probate

Probate is perhaps the least desirable part of estate planning. It is often lengthy, complicated, and costly, increasing wait times for beneficiaries to receive their portion of assets. If you have outstanding debt against your estate, the probate process is also where debtors can make claims and reduce what's left for distribution to beneficiaries.

This is why having a plan for debt management is critical. Try to reduce how much you still owe in mortgages, car payments, and other types of debt. This will ease complications during probate while ensuring that your will is executed correctly. There are also circumstances under which you could avoid the probate process entirely. An estate planning lawyer can review your assets to determine whether this option is feasible.

4.    A list of beneficiaries

An estate plan also gives you more options for listing beneficiaries. In addition to saying who should get what, you may also stipulate additional conditions such as age requirements, transfer of digital assets, and who should take care of underage children. This level of detail reduces confusion and ensures that all your beneficiaries receive their portion of assets exactly as you had intended.

For help with estate planning, contact a lawyer in your area.