Everyone owns an estate—everything you own, from your car to your home to your bank accounts to your furniture, is included in your estate. When you are no longer able to control the items in your possession, either due to death or disability, you will need some sort of plan in place to dictate what happens to these items without the court system deciding on your behalf.
An estate plan serves to provide written instructions on what you want to happen to your possessions and the individuals you would like to receive them after your passing. An ongoing process rather than a one-time consideration, estate planning should be revisited every few years to ensure your plan’s accuracy. No one is eager to plan for what will happen after their death—however, it is critical in order to leave the legacy that you desire for your loved ones. A plan can provide clear communication and help avoid conflict, confusion or a prolonged process in determining what to do.
There are many misconceptions regarding estate planning, with one of the most common ones being that you need to be wealthy to have an estate plan. While those with a higher net worth do have a great need for estate planning, individuals of modest or lower income are also strongly encouraged to plan ahead in order to preserve their legacy and retain more of their assets for their loved ones.
Another misconception is that only older individuals need to think about estate planning. Older individuals may think more often about preserving their estate, yet by starting the process earlier in life, you can rest easy knowing that you have a plan in place should anything happen to you.
Additionally, estate planning is commonly linked to planning for one’s death. While this is true, it also includes planning for what would happen in the case of a debilitating illness or injury. An estate plan can provide written instructions for the wishes of the individual and relieve the family or loved ones from making difficult decisions on their behalf during an already challenging time.
While you may have heard of a will, there are several complex terms in estate planning that are not quite common knowledge. Here a few to get you more familiar with terms you could be dealing with:
Will: A legal document that transfers property at death as specified. It names an individual (executor or personal representative) to administer the estate.
Living wills and medical directives: Documents that establish medical scenarios where life-sustaining medical treatment is either wanted or unwanted. Specific medical instructions may be included, such as whether you want certain life-prolonging measures.
Power of attorney: A document that gives another person the legal right to manage either some or all of your financial affairs if you are unable to do so. This can include health care or financial decisions.
Trust: A legal arrangement that involves three parties: the grantor, the beneficiary, and the trustee. This specifies the management and distribution of your property, as well as how and when it will be distributed.
You have worked hard to provide a legacy for your family to enjoy. When the time comes, you want to be able to pass along your assets to your loved ones—but both tax and legal complications can get in the way if a proper plan has not been established ahead of time. A North Star Resource Group financial advisor can help facilitate the creation or an update of your estate plan by following the steps below:
1. Your advisor will work with you to determine your estate planning objectives and goals, in addition to analyzing your current financial situation.
2. Your advisor will then actively work with your tax and legal professionals to develop recommendations for the option(s) that will suit your objectives and goals.
3. Once all of this information is determined, your advisor, in conjunction with your tax and legal professionals, will present the estate planning strategy recommended for you.
4. Your advisor can continue to assist and advise you on changes that occur throughout your lifetime.
5. Lastly, your advisor will offer assistance to your tax and legal professionals in the cost-effective administration of your estate plan after your death.
Planning for something that may happen years down the road and affects your loved ones is a rather large task. In considering what you want to leave and to whom, reflect on the following questions:
There is much to consider in your estate plan—from state laws to family considerations to tax implications and more. Estate planning is a highly personal process, yet with the right guidance and active assistance, you can obtain a sense of security in knowing that your legacy is protected.