Most of the news we hear about estate planning involves the rich and famous who either planned poorly or failed to plan for the distribution of their assets after their death, but you don’t need to be rich and famous to have an estate planning need. Estate planning is very broad and can apply to just about anyone.
What is an estate, and what is estate planning? “An estate is all the rights, titles, and interests that a person (living or deceased) has in any property. Estate planning is the process of planning for the accumulation, conservation, and distribution of an estate to effectively and efficiently accomplish both tax and nontax objectives.”
Estate planning ranges from being very simple to being very complex, depending on a person’s situation and wishes. Estate planning includes legal documentation of a person’s wishes while alive or deceased. By the way, if you don’t have an estate plan, the state in which you reside has an estate plan for you. The state will determine who should represent you if you become incapacitated or die and how your assets will be distributed. Below is a list of the basic considerations and legal documents that make your wishes known to loved ones and to state and federal governments:
Ownership – The type of property ownership (individual or joint) is an important consideration that has advantages and disadvantages depending on your specific situation.
Will – This is the legal document that expresses your wishes of how you want your property to be distributed or who you want to care for a dependent loved one at your death.
Durable Power of Attorney – This legal document governs your affairs if you are absent or become incapacitated while you are living and gives another person the authority to act on your behalf in medical or financial matters.
Living Will (Health Care Directives) – This legal document lists what specific medical treatments you do or do not want in the case of a medical emergency that leaves you unable to make medical decisions.
Beneficiary Designations – Retirement accounts and life insurance policies allow you to name individuals or entities to receive assets at your death. These named beneficiaries supersede what is written in your will.
There may be other types of legal documents that could be useful in your situation. We recommend consulting with a qualified attorney to assist in drafting or reviewing your estate planning documents. We do not provide legal advice, but we do want to make sure the financial plan we create for you is in line with your wishes expressed in your legal documents.
Laws change and so do our circumstances. As with any planning process, it is crucial to review your documents periodically to make sure they are still in line with your wishes. If you have experienced a major life event (birth, marriage, disability, etc.) or it has been five or more years since you reviewed your documents, now might be a good time to update your estate plan.
*College for Financial Planning (2007). Estate Planning: Estate Planning Process & Goals.