The Ultimate Guide to Understanding Estate Planning

Estate planning is the process of organizing how you want your assets managed and distributed, to protect your loved ones from legal hassles while fulfilling your wishes and saving on taxes! Estate planning may even save money for yourself!

But the legalese can be daunting; this guide will help make sense of it all.

What is an estate plan?

An estate plan is the process of designing how your assets should be distributed after your death, with the goal of respecting your wishes and protecting those closest to you from unnecessary legal challenges.

An estate plan should include your last will and testament, financial power of attorney and healthcare power of attorney documents to help protect the wellbeing of your family, spouse and any pets after your passing. Putting these plans in place helps guarantee their care when you're no longer around.

Beginning a plan for your estate as soon as you possess tangible assets is essential, with regular reviews to stay abreast of changes as your life evolves.

After reviewing your plans with those involved--particularly beneficiaries and guardians--it's important to revisit them together and go over how each decision could affect them. Our article, Talking about Your Estate Plan can provide helpful tips. Additionally, download our Letter of Instruction Template which guides the way.

Wills

Conversations about what should happen after death may be difficult and delicate affairs, yet essential. Without an estate plan in place, your loved ones will rely on state law alone to decide how your assets should be divided and who receives ownership of things such as homes and cars (or who inherits any credit card debt).

Your will can be as comprehensive or concise as you need, but typically includes a list of assets and their monetary values, along with instructions for their distribution and any final arrangements required by state laws. In some instances it might also be necessary to name beneficiaries for specific property such as life insurance policies and retirement accounts.

Your will must be signed by you and two witnesses to be valid, though notarization may also be useful but isn't required.

Trusts

Discussing an estate plan with loved ones can be difficult, yet essential to the process. This guide can make this conversation simpler while giving tips for choosing trustees.

Trusts enable you to customize your estate plan in many ways, including the timing and usage of assets. Trusts offer exceptional flexibility if you have concerns about beneficiaries spending their inheritance too quickly or have children with special needs who require help managing it all.

Trusts provide significant tax advantages, such as avoiding probate (the court-supervised process that validates wills) and possibly lowering estate and income taxes for beneficiaries. There may be fees involved with creating one, though; an attorney will probably need to draft documents; it is important to take these expenses into consideration when making your decision on whether a trust is right for you.

Powers of attorney

Powers of attorney are legal documents that grant someone you trust the ability to make financial, medical and other decisions on your behalf if you become incapacitated. There are various forms of power of attorney documents; their duration or scope of authority granted can differ accordingly.

An estate planning lawyer can assist in creating an estate plan tailored to your unique circumstances and goals, in order to reduce risk and ensure your wishes are carried out.

Your agent can also make gifts on your behalf; however, be mindful that any Power of Attorney you create must be carefully written to avoid unintended estate tax ramifications for both them and any beneficiaries you appoint. It is also wise to clearly outline each agent's responsibilities and powers within this document and keep a copy secure while providing their agent with access.

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