- August 7, 2021
- Posted by: Michael Gunning
- Category: Estate Planning
Estate planning is essentially all about deciding how an individual’s assets will be preserved, managed, and distributed after death. When adequately executed, estate planning minimizes legal issues or tax costs associated with an individual’s death while ensuring the proper distribution of assets to beneficiaries and descendants responsible for managing them after death. It also considers the management of an individual’s properties and financial obligations if they become incapacitated. The following is an overview of estate planning so you can make informed decisions about this critical aspect of long-term care strategy.
Estate Planning Basics
Who needs an estate plan? Anyone who has possessions and debt. If you’d like to control how your property is distributed upon your death, you need a plan. If you want to ensure that someone will handle your finances or health care after you become unable to do so, then an estate plan is for you.
Any adult can complete a comprehensive estate plan during their life, regardless of marital status or number of dependents. They are complex legal documents that require information about family members, assets and debts, financial institutions, and more. Most people choose to work with an attorney when creating their plans.
What is Estate Planning?
Estate planning isn’t just about creating a will or ensuring your estate passes to your beneficiaries. It’s about more than preparing for death—it also protects you and your family members during life. A will is a legal document that specifies how you would like your assets to be distributed upon death. If you become incapacitated, it provides direction for someone to manage your affairs until you regain capacity.
A durable power of attorney gives an individual permission to make decisions on behalf of another person when they cannot do so independently. Other documents, including living wills, trusts, etc., are all designed to ensure that a person’s wishes are carried out upon death or disability.
How Do I Decide Who Will Manage My Assets After I Die?
The first decision of estate planning is deciding who you want to handle your assets after you die. You can use a living trust, a will, or have a court decide for you; each option has its advantages and disadvantages. A choice allows you to give away assets directly, while a living trust preserves privacy by hiding some assets from creditors. You may also wish to appoint an executor of your estate with legal authority over it. Your executor can help settle all debts and expenses upon your death and then distribute whatever’s left according to your wishes as laid out in your will or living trust.
Estate Plan Checklist
An estate plan, or simply a will, is a legal document detailing how you want your assets to be distributed after your death. You must have an estate plan if you own property or have existing financial obligations, even if there isn’t much money involved. In addition to wills, estates often use trusts, generally used by wealthier individuals but are practical tools for any estate. Using both can help ensure that your loved ones receive what you intended them to and reduce administrative hurdles and costs after your death.
Here is a checklist of items to address in an estate plan:
- You can limit estate taxes by creating trust accounts in the names of your chosen beneficiaries.
- You can establish a guardian for your living-dependent children.
- Name an executor of your estate so they can oversee the terms of your will document.
- You can create or update a beneficiary on life insurance, IRAs, and 401(k) accounts.
- Estate planning can be used to set up funeral arrangements, so your family doesn’t have to take on that burden.
- Establish annual gifts to qualified charitable non-profit organizations, which can also reduce the size of your taxable estate
- Set up a Durable POA (power of attorney) that can direct other assets and investments.
NOLO offers some additional resources to get acquainted with the process of estate planning.