The Basics of Estate Planning
Defining “Estate Planning”
In short, estate planning provides clear and legally guiding instructions for your loved ones to manage your financial and personal affairs in the event of your death or incapacity. From the nomination of guardians, caring for minor children, planning of medical decisions with your physician to the passing of assets to heirs in a tax efficient manner. Estate planning may encompass complex areas, but doesn’t need to be complex or intimidating for clients. This educational guide is meant to help you understand the basics and become progressively more detailed to give you a clear understanding without overwhelming you.
The Reasons for the Estate Plan: Incapacity and Death
Most people already understand estate planning has something to do with passing away, however an often overlooked risk individuals face is the risk of incapacity due to accident, cognitive disease, or worsening health. These two risks form the core reasons we create estate plans. The goal is to use legal documents to articulate your wishes and ensure they are enforced when needed. Estate planning is not about losing control to incapacity or death, it is about retaining control despite incapacity or death.
The Four Pillars: Your Documents
An attorney serves as a guide through this process and will fully inform you and answer questions as well as draft the essential estate planning documents we call the “Four Pillars” of Estate Planning:
The Will
The Trust
The Durable Power of Attorney (DPOA)
The Advance Health Care Directive (AHCD)
Our job is to help you make the important decisions with clarity and confidence. We will help you understand and think through the benefits or consequences of the options available to you and how the “Four Pillars” can be used to your advantage.
Minimize what you leave to the government.
Depending on your estate size, federal and state taxes on gifts and estates may be some of the highest tax amounts assessed. Fortunately, gift and estate taxes have exemption limits allowing you to make certain transfers without incurring the tax.
Many clients elect to utilize these exemptions to make gifts while living and not only minimize taxes or maximize the value to beneficiaries but also to enjoy the satisfaction that comes from using assets for something positive during life.
Maximize what you leave to loved ones or charity.
A primary focus of clients and attorneys is understanding how each asset will pass to your beneficiaries. The asset type, asset size, age of the clients, size of family, and many other factors may change the strategy you will use to maximize the value of your estate. Aside from taxes, you will want to lose as little value as possible to court fees, professional fees, time delay, and other expenses.
Thy will be done.
In our view, the most important aspect of estate planning is the maintenance of client control. It is understanding your estate and ensuring that the objectives and goals you have for your assets and estate are realized. We will help you communicate your wishes clearly and effectively in a way that avoids mistakes and allows adjustments when the changes in your life or changes in the law require a change in your plan.
Continue: What is my estate?