Estate Planning 101
At its most basic, an estate plan is your plan to control your assets during life and to direct distribution of your assets at your death. There are three main focuses to an adequate estate plan: 1) ensuring your assets are sufficient and properly used for your support during life; 2) ensuring your remaining assets are distributed according to your wishes at death; and 3) minimize exposure to fees, costs, and taxes. Estate planning generally involves trust-based planning or will-based planning.
Now I’m going to address some commonly-held misconceptions we hear every day regarding estate planning.
- Estate planning is only necessary for the elderly or ill. This would be true if life was predictable. However, the bottom line is everyone over age 18 needs adequate estate planning and no one can predict the future.This is especially important when you consider that should you become disabled, unless you have appointed a healthcare agent, no one is legally permitted to access your medical information or make decisions for you.Failure to adequately plan will likely result in a court proceeding called a guardianship.
- Estate planning is really death planning and is not applicable until I die. As stated above, one of the most important aspects of estate planning is ensuring that you remain comfortable and taken care of during your life.This is especially important should you become disabled or incapacitated in some way.Proper estate planning allows you to appoint someone to manage assets on your behalf and helps minimize the possibility of court intervention.Estate planning also will set up contingent guardians for your minor children if you become incapacitated.
- If I have a Will, I will avoid probate. I hear this often.When you are considering your choice between a living trust or a Will, it is important to understand that a Will is probated.Unless all your property is distributed through beneficiary designations, a formal court proceeding called a probate is necessary to pass property through a Will.If avoiding probate is a big concern for you, you should consider using a properly funded living trust as your estate planning vehicle.
