Some of us are planners and some of us
are not. The phrase "make a plan" can make some us run for
cover. At some point in our lives we will all need to make plans and
provisions for our loved ones we will leave behind. Estate Planning
is a critical tool to ensure our loved ones are taken care of once we
are gone by making sure that our estate is disposed of in the manner
we desire it to be.
Estate Planning Defined
Estate Planning is the process of disposing
your estate (property) in such a way that your designated beneficiaries
receive the maximum benefit according to your wishes. The process of
estate planning includes planning to pay the least amount of taxes;
minimizing or avoiding probate court; designating guardians for minor
children and planning in case of your mental incapacitation.
Estate Planning Elements
The elements of estate planning can include
a will, durable financial power of attorney, durable medical power of
attorney, living will, trusts (various types), beneficiary designations,
gifting and life insurance policies. As with any type of legal decisions
make sure you consult tax, financial and legal advisors before beginning your estate planning.
Will . a will is
a document where a person controls the rights of others over his or
her property and/or family after death. The will is one of the primary
elements in the estate planning process.
Durable Financial Power of
Attorney. A written instrument under which an individual,
the principal, designates another person as attorney-in-fact or agent.
This is a contract which creates and agency-principal relationship and
becomes effective upon the principal's becoming incompetent, incapacitated
or unable to manage his or her affairs.
Durable Medical Power of Attorney
. Not to be confused with a living will, the durable medical power
of attorney, an important part of estate planning, is used to give decision-making
authority to another person (typically a family member or close friend).
This person, the attorney-in-fact ,
then makes all medical decisions leading up to the person's death,
but has no such power to make end of life decisions for the patient.
Living Will . The
living will controls only those decisions that must be made at
the end of the patient's life. These decisions are made by the
patient not by the medical attorney-in-fact (durable medical power of
attorney). In the absence of a living will, and where the patient is
incapable of making end-of-life decisions the choices are then left
to family members. Be sure to include a living will in your estate planning to take this burden off your family members.
Trusts . Trusts are
used in estate planning for various reasons. Two common uses of
a trust in an estate are 1) when parents wish to leave money or property
to their children once the children reach a certain age (typically 21
or 25) and 2) when a person wishes to leave some or all of their estate
to a charitable organization. A trust is a fiduciary relationship in
which one party holds legal title to another's property for the benefit
of a party who holds equitable title to the property. The trustee is
a natural or legal person to whom property is committed to be administered
for the benefit of a beneficiary (as a person or charitable organization).
Beneficiary Designations
. the person(s) or legal entity(s) that receive money, property or
other benefits as specified by the deceased through the will, insurance
policies and financial accounts. A beneficiary is a person or entity
(as a charity or estate) that receives a benefit from something such
as a trust, money or property. It is recommended to also have contingency
beneficiary(s) named to receive the proceeds if the primary beneficiary
dies. Beneficiaries are also critical to estate planning.
Gifting . Gifting
is the act of an intentional and gratuitous transfer of real or personal
property by a donor with legal capacity who actually or constructively
delivers the property to the donee with the intent of giving up dominion
over the property and investing it in the donee who accepts it. There
are many laws surrounding gifting. It is strongly recommended
that you consult a tax attorney and/or financial advisor before making
or designating any gifts over $10,000 for estate planning purposes or any other.
Life
Insurance Policies . Most people have life insurance policies
as part of their estate planning process. Life insurance is policy
insurance providing for the payment of money to a designated beneficiary(s)
upon the death of the insured.
Define Your Estate Planning Goals
When defining your goals in estate planning
it is important to consider all factors: children, other family, money,
property, medical decisions and last wishes. Below is a list of
questions to consider when beginning the estate planning process.
It will get you started in defining your goals. This list is not exhaustive
but it is a good place to begin the estate planning process and establishing
your priorities.
Who will become guardians
for your minor children?
Who will become guardians
for your elderly or dependent parents?
How do I want to handle passing
of assets to my heirs to meet my family.s needs and not overwhelm
anyone?
How can I avoid family conflict
and future ill-will?
How can I minimize the expense,
delay and publicity of the probate process?
What stipulations will I make
in regards to whom will operate the business and handle family affairs
during a disability or after my death?
How can I eliminate unnecessary
income and estate taxes?
How can I provide adequate
liquidity to pay final expenses and taxes?
Estate Planning Resources
MoneyManager.com will find the perfect
financial advisor to help you save, invest, and retire. Take your time,
browse our library, and then let an experienced professional financial
advisor work with you to reach your financial goals. Simply follow our
matching process above to be matched with a qualified advisor, which
is always a free service to you.
There are literally thousands of estate
planning resources available. A word of caution . find a resource
that you trust. The estate planning decisions you make can have
lasting implications for your loved ones and others. It is strongly
recommended that you consult your tax, financial and legal advisors while you are in the estate planning process.
There are also many other resources online
such as moneymanager.com to help educate you on the estate planning
process. Listed below are some additional resources.
Money Manager 101
Informative articles on a number of topics, MoneyManager.com is designed to help you do research on your own at your convenience. This will allow you to identify the perfect financial advisor that fits your needs. Take your time, browse our library, and then let our system deliver your information to a list of advisors that want to manage your money. Simply follow the process above to start the process, which is always a free service to you.
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