Most people hear the term “estate planning” and either don’t know what it involves or don’t fully understand what an estate plan accomplishes. This article is an Estate Planning 101 to help explain what estate planning is all about, including what an estate is, the goals of estate planning, what an estate plan does, and what documents you might expect to see in an estate plan.
What is Estate Planning?
Estate planning is the process of thinking about and addressing your wishes with regard to two events: your unexpected disability during life as well as your testamentary plans for the disposition of your estate after your death.
What is an Estate?
The short answer is that an estate consists of every piece of property you own.
Examples of assets commonly found in an estate includes your house, any other real estate you may own, your cars, your personal effects such as jewelry and clothes. It also includes your bank accounts, brokerage accounts, IRAs, 401k’s, other retirement accounts, life insurance, and your business interests.
One asset class often overlooked are your digital assets. For example, Apple ID’s , Facebook accounts, as well as files and documents stored online are all part of your estate.
In probate, after you pass away, your estate may have liabilities in the form of unpaid debts and may have claims against third parties that arose during or at the end of your life (for example, an asbestos, medical malpractice, or wrongful death claim).
What are the Goals of Estate Planning?
Every person’s estate planning goals differ because everyone’s life is different. Your estate plan will develop based on your planning goals that are specific to your life, your family, your assets, and your wishes.
That being said, below are a list of some of the common goals clients have when constructing their estate plan:
- transferring assets at the death to the beneficiaries they wish to receive them;
- planning for incapacity or disability;
- providing instructions for their end-of-life care wishes;
- charitable giving;
- protecting assets from creditors; and
- protecting assets from their beneficiaries’ creditors.
What Does an Estate Plan Do?
A properly constructed estate plan will usually accomplish the following objectives:
- identify the individual recipients of your assets after your death and allocate your assets to them according to your wishes;
- make sure that the transfer of your assets is accomplished as efficiently as possible;
- minimize the costs imposed on your estate through taxes and the costs of probate;
- make sure your non-probate asset dispositions are consistent with your probate asset dispositions;
- make your end-of-life medical care wishes known;
- address who will make medical decisions for you in the event you become incapacitated or disabled and are unable to make those decisions yourself;
- address who will manage your assets and pay your bills in the event you become incapacitated or disabled;
- provide for the designation of whom you wish and whom you do not wish to serve as your guardian should the need arise; and
- set forth detailed instructions for how you wish your remains to be handled, whether by cremation or funeral.
Other objectives an estate plan might accomplish include the following:
- planning for the care of minor children in the event both parents pass away;
- planning for the care of a child with special needs; and
- planning for the care of a family pet;
What Type of Documents Should You Expect to See in Your Estate Plan?
Basic estate plans will include the following documents:
- a last will and testament;
- an advanced directive (also known as a living will);
- a power of attorney;
- a medical power of attorney;
- a designation of guardian; and
- instructions on disposition of remains.
More complex estates might also include additional documents such as inter vivos or testamentary trusts as well as business organization documents.
You can read more about each of these documents and what they do by visiting this link: Key Estate Planning Documents.
If you would like to contact my firm to schedule a consultation to discuss your estate plan, then please visit the firm’s contact page by clicking here.
- New Texas Law Makes Modifying Child Custody And Support Orders Easier - June 9, 2021
- Dividing a Business in Divorce - June 1, 2021
- Joint Managing Conservatorship vs Sole Managing Conservatorship - May 25, 2021