WHAT IS ESTATE PLANNING?
Estate Planing allows you to determine how your property will be distributed at your death, specify your health care wishes in case you are incapacitated and ensure your loved ones are provided for in your absence. A comprehensive and a well-drafted estate plan can eliminate various legal questions that may come up when someone dies. What real and personal property do you own? Who gets what? How will your financial affairs be settled? Does a guardian need to be appointed for the care of minor children? How much tax will need to be paid in order to transfer ownership of property?
Your estate includes everything you own, such as your house, bank accounts, stocks, life insurance policies and all of your personal property. Regardless of your age or the size of your estate, one of the most important reasons to have a plan is to ensure that your loved ones are cared for in your absence. In order to begin an estate planning process, you need to have an accurate picture of your estate. Make a list of all of your major assets and liabilities. Second, think about your values and wishes. Consider what is important to you, how you want to preserve those beliefs and how you want to pass them along to future generations. For instance, through your estate plan, you can encourage a family member to attend college by providing to pay for tuition or you can discourage alcohol or drug abuse by limiting access to funds from heirs who have substance abuse problems.
The time you take to establish a plan will provide your family with a great deal of comfort. If family members are called upon to act on your behalf in case of illness or death, an existing plan will make those difficult decisions for them and take the burden off your family.
Here are some estate planning tools that can provide a way for you to plan for the future:
Wills: There is no set formula for what’s included in your will. There is no such thing as one-size-fits-all. However, there are some things you might want to consider whether you are single, married, divorced, part of an older couple, younger couple or an unmarried couple. In your will, you designate your beneficiaries and make gifts to them as you wish, nominate a guardian for minor children, provide for any funeral directions and anatomical donations. If you do not have a will, your estate will be distributed according to intestate succession, meaning state law will determine how your property will be distributed.
Trusts: The flexibility of trusts make them an appealing estate planning tool. A trust can eliminate the need to appoint a guardian for your estate should you become incapacitated ( a general durable power of attorney will also eliminate the need for a guardianship). A trust will also allow you to control and manage your property while you are alive and distribute your assets to your beneficiaries without the need for a probate proceeding.
Special Needs Trusts: This special type of trust allows individuals with disabilities to have an unlimited amount of assets in a trust without disqualifying them from government benefits.
Life Insurance Trusts: This particular kind of trust acts as the owner and beneficiary of one or more life insurance policies. Some of the benefits include tax benefits and control over the distributions to your beneficiaries according to the terms of a trust instead of an outright distribution to your beneficiaries. This trust can be utilized by those who do not need to access the cash value of life insurance policies during their lifetimes.
Durable powers of attorney: This document allows you to name an agent to make financial decisions for you in case you are incapacitated in any way.
Advance health care directives: A health care directive allows you to designate an agent to make medical decisions for you in case you are unable to make decisions for yourself.