Estate Planning Helps with Your Financial Affairs and Protects Your Heirs
Estate planning can start when you are young; you don’t need to be super rich to have one. You can learn and benefit from estate planning regardless of age or financial status. The prerequisite? An asset or more to leave behind.
An estate is the total assets and liabilities someone holds at their death. Think about that for a few seconds. What do you own? How about real estate (home or land), investments, life insurance, or personal possessions, like a car, boat, furniture, and art?
Two essential terms are:
‘probate estate,’ which is a somewhat familiar term, is the estate of someone who has passed away without a will, and
‘trust estate’ refers to assets passed into a trust AFTER death.
What is an Estate Plan?
An estate plan is a written record of your wishes and intentions and allows YOU the opportunity to state how YOUR assets (property, belongings, cash, etc.) are distributed; people or organization(s) you care about.
If you somehow don’t indicate in writing your wishes and intentions before your death, then the state steps in, and probate courts will make them for you. The result might not be what you wanted or take care of your family.
Estate Planning Beyond the Will
Many people consider a will and an estate plan to be the same thing. They're not. Both will and estate plans provide instructions on handling your goods and assets after your death, but estate planning encompasses much more.
If you cannot provide instructions yourself, you'll need to set up durable powers of attorney to appoint individuals to make medical and financial decisions.
If you become incapacitated, you'll need to assign medical directives to outline the kinds of medical treatment you want (or don't want).
Assign beneficiary designations to explain who should receive money from life insurance policies, annuities, retirement accounts, and other financial accounts.
Create one or more trusts to facilitate the passing of property to your heirs and provide tax benefits for both you and your beneficiaries.
Estate planning saves time and money.
The state laws where you live and own property determine what happens to your assets when you die without a will. If that happens, it is called "intestate." The probate court names a representative to distribute your assets, and in many cases, the surviving spouse gets this job. But if no surviving spouse exists or another close family member is willing or able to do the job, the court will name a public trustee to distribute your assets according to state law.
While all this is happening, no one can touch your assets or carry out your directives. They're frozen until the court system combs through every detail of your estate, applies state laws, pays off debts, and decides how to allocate your assets.
The probate process involves paperwork with court appearances by lawyers; fees are paid from the estate, which can be time-consuming and expensive. So, to circumvent that, you can significantly reduce the time and expense of dying intestate by estate planning.
Ensure all your investment accounts (IRAs, 401(k)s, other brokerage/bank accounts) have correct, living beneficiaries. These designations render bequests in a will unnecessary.
Create a will that names an executor of your estate.
