Estate Planning Basics
Estate planning is a multifaceted process that investors should consider. It includes reviewing legal and tax implications, investment strategies and personal matters to ensure your estate is set up efficiently.
Let’s look at some of the most important estate planning documents you should have prepared.
Power of Attorney
Power of Attorney (POA) grants authority to an appointed agent to manage your affairs if you're unable to do so. Failure to designate a POA may result in the court determining how your assets and situation are handled. You're not limited to family members; a trusted friend or professional can serve as your agent, particularly if they possess strong financial and estate planning expertise.
The POA can be activated immediately or triggered by specific events such as illness or disability. The agent's authority ceases upon the principal's death, at which point control shifts to the executor of the will or the trustee of the trust.
Wills & Trusts
Two key documents to consider in estate planning are a will and a trust. A will is a document that outlines your wishes regarding the distribution of your assets and the care of any dependents. A trust serves as a tax-efficient method for organizing asset ownership, allowing a third party to hold these assets on behalf of a beneficiary.
A well-crafted estate plan may involve one or both of these documents, each serving distinct purposes. By preparing a will and, if needed, a trust, you can help protect your legacy and simplify the transition of assets upon your passing.
Beneficiary Designations
As you create your estate plan, remember to update your beneficiaries. Make sure you have contingent beneficiaries listed for insurance, retirement accounts, and in your will or trust. If no beneficiary is stated, your estate may end up in the hands of the court, which can be an inefficient and impersonal way to handle your assets.
Other considerations
Your attorney should take the time to become familiar with your situation, assets and goals. Here are some questions to ask:
- What types of estate planning documents do I need based on my unique circumstances?
- What happens if I become incapacitated and unable to make decisions for myself? How can a power of attorney help?
- How do wills and trusts differ, and which one is suitable for me?
- How should I title my assets to satisfy a will or trust or avoid the need for either?
- How can I ensure my assets are distributed according to my wishes after I pass away?
- How can I minimize estate taxes and ensure my beneficiaries receive the maximum inheritance?
- Can you assist me in choosing the right person(s) to act as my executor, trustee, or power of attorney agent?
- What are the potential implications of not having an estate plan in place?
- How can I protect my assets and provide for my loved ones in case of unforeseen events or long-term care needs?
- Will the plan we create be easy and cost-effective for my beneficiaries and named agents to manage?
- How often should I review and update my estate plan to reflect any changes in my life or legal requirements?
Where to Start?
Get in touch with an attorney in your state to learn more about a power of attorney, wills, and trusts. Need a referral? We maintain a network of reputable attorneys and would be glad to refer you to someone who may be a good fit for your needs.