Estate Planning: An Overview
You may have heard the term “estate planning,” but you might not know what it encompasses and why it’s so important. Below is a brief overview of estate planning basics, including what estate planning is, who needs an estate plan, what documents make up an estate plan, and whether you need an estate planning attorney.
What is estate planning?
Estate planning is the general term for getting your financial affairs in order before your incapacity or death. Your “estate” is everything you own at the time of your death, including both real (e.g. real estate) and personal property (e.g. accounts, cars, jewelry, etc.).
At the very least, estate planning requires that you sit down and list all your assets and figure out where you would like them to go after you die. You should also consider any potential debts and other liabilities to maximize the amount your beneficiaries will receive.
While drawing up your estate plan, you will also be called upon to choose the people you will trust with handling your affairs, both in the event you become incapacitated and after your death.
Additionally, estate planning can include your wishes for the kind of medical treatment you wish to receive (or not receive) should you not be able to express your preferences when the time comes.
Who needs an estate plan?
Contrary to the common belief that an estate plan is meant only for the wealthy, everyone should have an estate plan, even if you don’t have many valuable assets. You will be sparing your loved ones additional stress by having your affairs in order, and you can feel at ease knowing that you’ve taken steps to ensure that your property will go where you desire when you’re gone.
Estate planning documents
No two estates are exactly alike, but the following documents will put you well on your way to a solid estate plan.
One of the most basic estate planning documents is a last will. A will determines who you leave your property to. It can also set up trusts, name a guardian for your minor child, and name an executor—the person in charge of carrying out the instructions in your will. Wills must be in writing and signed in front of two witnesses. After death, most wills go through probate, a court process that validates the will and authorizes the distribution of the estate assets. Depending upon where you live and the size of your estate, probate can be expensive and time consuming.
A revocable living trust allows you to place most of your assets into a trust during your lifetime. The assets are owned by the trust but you, as trustee, continue to use and spend them. Upon your death, the assets pass to your beneficiaries without going through probate. A living trust allows you to control when your beneficiaries get their inheritance (for example, you can choose milestone birthdays). Living trusts aren’t for everyone. In some states, probate is a simple process, so it may not be worth the time and expense of creating and funding a living trust.
A living will states your wishes for life-prolonging medical treatments. The document is legally binding for your physicians. A health care power of attorney or health care proxy is another important document that names the person you select to make medical decisions for you should you be unable to.
Power of attorney
A power of attorney authorizes someone else (such as your spouse, your child, or a trusted friend) to make legal, business, and financial decisions for you should you become unable to manage your own affairs. This document allows bills to be paid, banking to be completed, and transactions to be handled on your behalf if you are disabled. A power of attorney can be springing (taking effect only if you become disabled) or durable (allowing the person to manage affairs for you at any time).
How LifePlan can help
LifePlan membership gives you access to estate planning resources and allows you to complete your estate planning documents with assistance from an independent attorney. Log in to your LifePlan account or contact our customer service to learn more about the estate planning included in your membership.