Estate planning is something that many of us are keen to put off until it is necessary, but many people do not realize just how necessary it is early on in life. While a will is the bare minimum, a comprehensive estate plan addresses and makes provisions for so much more—making it easier for you to plan out the allocation of your assets and making it easier for your loved ones to execute your wishes after you are gone.
With protection of our assets, family, and business at the forefront of conversation, Estate Planning is a crucial part of any financial strategy. Below, we’ll be looking at what an estate plan is as well as when and why you need one so you can be prepared.
What is An Estate Plan?
While a will is typically the first step towards establishing an estate plan, a full plan will go far beyond the division of assets. An estate plan is a comprehensive guide to your wishes and assets for when you pass on. It not only covers your assets, but it also determines who can make financial and medical decisions if you are unable to and how estate taxes will be handled for your surviving heirs. An estate plan is generally made with the help of a financial advisor or estate attorney and you will designate an executor to oversee the division process when the time comes.
When Do I Need An Estate Plan?
If you aren’t sure whether or not you need an estate plan at this point in your life, chances are, you likely do. Anyone who has children, owns a home or car, and has assets to leave behind can benefit from creating an estate plan. Whether you have bought your first home, had a child who’s custody must be determined if you are absent, or have a significant amount of assets to leave behind, the time to create an estate plan is now.
Why Do I Need An Estate Plan?
While it is something that many of us are hesitant to think about, it can make life tremendously easier on your surviving loved ones in case the unexpected happens. Dealing with the legal implications of a poorly written will (as well as the significant estate tax rate that heirs will be subject to) can make life much more difficult on those you leave behind. A well-organized estate plan can eliminate the majority of these headaches and significantly reduce the taxes that your heirs will need to pay.
What Does An Estate Plan Include?
While an estate plan does include a will, there are a few more documents that go into making your plan a comprehensive one. At minimum, an estate plan should include:
- Will: The document that clearly states your desire for the division of your property and the care of minor children. At a bare minimum, you’re never too young to have one. No matter your asset level, a Will should be established.
- Trust: The document that names a trustee who will oversee your wishes and outlines who receives the property and when. Trusts can be used even before your passing if you wish. This entity will help your assets avoid probate and give you control from the grave as to how your beneficiaries receive parts of your estate, and you may even list milestones they can hit before receiving their inheritance.
- Financial and Health Power of Attorney: If you are unable to make decisions for yourself, whether they be financial or health related, a power of attorney designates a party that is authorized to make those choices for you.
- Living Will: This document is for your healthcare providers so they can understand your wishes for end-of-life care. On one of the worst days of your partners/spouses’ life, you don’t want them making heart-wrenching decisions on your behalf. It needs to be written and recorded.
If you need assistance with estate planning, we have surrounded ourselves with professionals we trust to connect you with. We would love to walk you through your options—contact us today to get started.