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What Are the Components of an Estate?

Posted on November 10, 2022 in asset protection,estate planning

Estate planning can be intimidating. Many people do not know where to begin, and others do not want to think about what will happen to their possessions, investments, and family members after they pass away. Although thinking about your own mortality can be an uncomfortable thought, it is extremely important that you take the proper estate planning steps while you are healthy and of sound mind.

There are many options available to you when it comes to estate planning. By understanding the main components of this area of law, you can better use the information to your advantage. Our attorneys at Ken R. Ashworth & Associates are here to help you navigate estate planning and all the paperwork and legal steps that accompany it. With the help of an estate planning attorney, you can make arrangements that will benefit your family for generations.

Wills

Perhaps the most common component of an estate is a will. This document is essential to the estate planning process. Even if you do not set up other aspects of your estate plan until later, you should have a will for the entirety of your adult life. This document will outline what will happen to your basic assets and can include a plan for any minors over whom you have custody. Once you own significant property, acquire assets, or have children, you need to create a will as soon as possible.

Trusts

Trusts are more complicated than wills, but they have distinct benefits as well. Trusts allow you to transfer your assets to a third party, called a trustee. This person will oversee the distribution of your assets to your beneficiaries when you die. Because the trustee has legal control over the assets, many parts of your estate will stay out of probate. You can create a revocable trust or an irrevocable trust. The former allows you to make changes while you are still alive, while the latter is rigid and does not allow for changes.

Powers of Attorney

Powers of attorney are extremely important legal documents. They will allow you to designate a trusted individual to make decisions on your behalf. For example, a medical power of attorney allows you to choose someone who will be in charge of your medical and health decisions if you are incapacitated or otherwise unable to make them for yourself. This right can be crucial to you, your family, and your ongoing wellbeing.

A durable power of attorney gives a trusted individual the right to make decisions about your finances and property. They can also sign documents on your behalf if you are unable to do so. This can be helpful for you in many ways and will ensure that bills get paid if you are incapacitated.

Giving trusted individuals powers of attorney offers security and peace of mind if something tragic or unexpected should occur.

Advanced Healthcare Directives

Another way to control your medical treatment is through advanced healthcare directives. These documents outline what you would like to happen if you are unable to decide for yourself. A DNR (do not resuscitate) is a common example of a healthcare directive that prevents medical professionals from taking extreme measures to keep you alive.

It is best to have both advanced healthcare directives and a medical power of attorney to ensure that you are covered in all situations.

Beneficiary Designation

One of the key components of any estate planning method is designating the beneficiaries of your estate. These people will inherit various parts of your estate when you pass away. By naming them yourself, you have control over who gets which of your assets. If you want certain individuals to inherit certain items or accounts, beneficiary designation is essential.

If you do not designate beneficiaries, your family will inherit based on next of kin status. If your next of kin inherits all your assets, they can keep them for themselves, and the rest of your family could be left with nothing.

FAQs

Q: What Are the Five Components of Estate Planning?

A: Attorneys often split estate planning into five components:

  • Wills and trusts
  • Healthcare power of attorney
  • Durable power of attorney
  • Beneficiary designations
  • Advanced directives and living wills for medical concerns

Navigating these components can be confusing and difficult. You should always work with a qualified estate planning attorney to create any of the above estate planning agreements.

Q: What Assets Are Considered Part of an Estate?

A: Some of your assets can be laid out in your estate plan, while others may not. Assets that are considered part of your estate include:

  • Physical assets
  • Intangible assets
  • Personal belongings
  • Real estate and land holdings
  • Investments and investment accounts
  • Furnishings
  • Collectible items

If you have other items that you would like to outline in your estate plan, your attorney can work with you to create a document that reflects all your wishes.

Q: What Assets Are Not Considered Part of an Estate?

A: Certain assets live outside of your estate plan. Although you may have beneficiaries for them, they are separate from your estate. They include:

  • IRAs
  • 401k accounts
  • Bank accounts that have beneficiaries
  • Pensions

If you have these accounts, your attorney can help you understand how they work and how to plan your estate without these assets.

Q: What Are Three Essential Elements of an Estate Plan?

A: An estate plan’s three essential elements are:

  • Legal document execution
  • Asset title coordination
  • Beneficiary designation updates

You may have to make changes and updates to these elements after you create your estate plan. After all, your assets, legal obligations, and loved ones may change over time. These elements should be updated to reflect your current situation.

Contact Ken R. Ashworth & Associates

When it comes to estate planning, no team is more qualified to offer help than our attorneys at Ken R. Ashworth & Associates. We have years of training in this field and can help you create a proper estate plan for your assets.

For more information, please contact Ken R. Ashworth & Associates today.