Estate Planning: An Overview
Estate Planning: An Overview
You may have heard the term “estate planning” thrown about, but do you know what it encompasses and why it’s so important?
Below you’ll find a brief overview of estate planning basics, including the following: what estate planning is, who needs an estate plan, what documents make up an estate plan, and whether you need an estate planning attorney.
What Is Estate Planning?
Estate planning is the general term for getting your financial affairs in order before your death. Your “estate” is simply everything you own at the time of your death, including both real (real estate, for example) and personal property (cars, jewelry, etc.).
Estate planning, at the very least, requires that you sit down and list all your assets and figure out where you would like them to go after you die. You should also consider any potential debts, including federal and state estate taxes to maximize the amount your beneficiaries will receive.
While drawing up your estate plan, you will also be called upon to choose the people you will trust with handling your affairs both after your death and in the event you become incapacitated.
Additionally, estate planning can include your wishes for the kind of medical treatment you wish to receive (or not receive) should you not be able to express your preferences when the time comes.
Who Needs an Estate Plan?
Don’t be fooled into thinking an estate plan is meant only for the wealthy. Everyone should have an estate plan, even if you don’t have very many assets or the value of your estate will be quite low.
Regardless, you will be sparing your loved ones some hassle by having your affairs in order and you can gain great peace of mind now, knowing you’ve prepared all you can and that your property will go exactly where you desire when you’ve passed away.
What Are Examples of Estate Planning Documents?
No two estates are exactly alike, but if you use the following estate planning checklist, you can be sure you’re well on your way to a solid estate plan.
- Last Will and Testament: a legal document written by a “testator” detailing his or her wishes regarding the distribution of assets. The testator may also name a legal guardian for minor children and specify funeral arrangements in a last will.
- Living Trust: a legal document written by a “grantor” through which assets are placed into a trust for the benefit of the grantor during his lifetime and then are passed on to selected beneficiaries at the grantor’s death. Living trust property passes directly to beneficiaries at the death of the grantor, bypassing the probate process, which saves both time and money for beneficiaries.
- Living Will: a legal document (sometimes called an advance directive or health care directive) that provides instructions regarding the medical care you wish to receive (or not, such as breathing and feeding tubes) should you become incapacitated or seriously ill and incapable of communicating your preferences yourself.
- Power of Attorney: a legal document (sometimes referred to as a POA) that grants someone of your choice the authority to make decisions for you if you are unable to do so. This person is called an agent. You should have both a power of attorney for health care as well as a durable POA or “financial power of attorney” to handle your finances. These can be the same person, but none of them have to be an attorney.
Do You Need an Estate Planning Lawyer?
All of the above documents can be drawn up and executed without the assistance of an estate planning attorney, but as these are some of the most important documents you’ll ever sign, you might want to get some help just to make sure you’ve got everything covered.
Now that you know the estate planning basics, there's no time like the present to get started. Just think of the effort you put into estate planning now as your final gift to your loved ones—no one wants to deal with money issues during an already stressful time—and rest easy knowing you've done all you can, while you still can.
LegalZoom can help you protect your estate with an estate planning bundle. The estate planning bundle offers exceptional value and includes a last will or living trust, a power of attorney, a living will (advance directive), and one year of attorney advice - all for one low price.