Login

New to Investment Firms?

Register

Already have an account?

What Is Estate Planning?

Estate planning creates a plan for individuals to name who they would like to receive their property after passing. And believe it or not, everyone has an estate. Your estate is not just your home. It consists of everything you own, from your bank accounts to your home, your car to your personal possessions.

It also encompasses your living will and provisions for incapacitation. No matter how large or small your estate, having a plan in place is highly advised. 

Estate Planning vs. Will Planning

While some might think that estate planning and will planning are one in the same, they are actually different. To start, it is best to look at the similarities between what a will is and what estate planning is. Both estate planning and will planning provide instructions to your relatives about how to handle your property after death. But estate planning takes this process one step further. Estate planning is a detailed process that requires documents of various types to secure your assets after you pass. Your will is just one part of this documentation.

Your will provides the instructions of your wishes but is required to go through your state’s probate process before distribution. While this process varies state to state, it can be an expensive and lengthy process for your loved ones. That is why legal professionals recommend estate planning with a living trust. Estate planning can help avoid probate that is valid in all states. This saves your family the stress and expense of probate.

Factors To Consider For Estate Planning

Estate plans are not just for people of retirement age. There is no crystal ball that predicts how long we will live. Accidents and illness happen to people at all stages in life. If you have any assets and/or a family, you should at least execute a will. Depending upon these factors, you might want to consider estate planning:

Children

The arrival of children in your life significantly shapes your need for estate planning. Drafting an estate plan provides you, as the parent, the opportunity to name a guardian for your child/children. The guardian will manage assets that your minor child might inherit.

Size Of The Estate

If you have a legally complex estate that crosses state, or even international borders, it is highly recommended to create an estate plan.

Preparation For incapacitation

While many think that estate planning is just for provisions after death, this is not the only case. A critical component includes documentation of your wishes in the event you become incapacitated. A financial power of attorney can be named to help you with your financial affairs if you are unable to manage them yourself.

Philanthropy

It is possible that you have a considerable estate, and you may also have the desire to give to charity. If this is the case you can incorporate your philanthropic goals within your estate plan.

Business Succession

If you are a business owner, or business partner, you will need to consider what happens to your business if you pass away. 

Estate Planning Steps

There are seven basic steps required for estate planning. With, or without, the assistance from an attorney, most people follow these guidelines:

Step 1: Sign Your Will

Within your will, you’ll need to choose heirs for your assets. It is imperative to identify who will have the responsibility and power to pay your debts. Not only debts, but you want someone who will follow the remainder of your wishes. Without a will, your property will be passed based on the laws of your state. This may ignore any wishes you might have.

Step 2: Name Your Beneficiaries

This is a vital step to understand the differences between beneficiaries listed in your will and those in your estate. Not all assets pass through your will, because some — like your house — might be owned jointly. 

Step 3: Cut Estate Taxes

While many Americans don’t need to worry about federal estate tax, those that do will want to ensure that their federal estate and gift tax exemptions can be utilized by their successors. 

Step 4: Leave A Letter To Your Survivors

While this isn’t required, having a letter to your survivors, even those not in your will, can leave them with sentimental value long after your passing. Your letter does not have to fit any criteria, you can describe your desires, items you want them to inherit, or anything you wish to say after your passing.

Step 5: Complete A Durable Power Of Attorney

Having a durable power of attorney can be useful in the event that your health declines rapidly and you are too sick to make your own decisions. This allows your designated friend or relative to be in charge of your finances and decisions when you cannot. Without one, if you become incapacitated, a judge will appoint you a guardian or conservator to manage assets and pay your bills. Stay ahead in case of declining health by selecting your financial proxy.

Step 6: Create Your Advanced Healthcare Directive

Along with making financial decisions, a health care directive can state the type of medical decisions and procedures you do (or do not) want. Your health care proxy or agent can ensure your medical professional carry out your wishes in the event you are incapacitated or too sick to speak for yourself.  

Step 7: Organize Your Files, Both Paper And Electronic

You will be required to gather all your estate-planning paperwork and financial records, then store them in a safe place. Many chose to keep the records in their lawyer’s vault, in a home office, or a safe-deposit box at the bank. Make sure you have all the documents that the executor will need, including but not limited to insurance policies, bank statements, pension and other benefit information, list of assets, and deeds to your burial plot. 

How To Start An Estate Plan

After you have reviewed your personal needs and determined that an estate plan should be executed, there are various ways to get started. It is important to remember that no matter which route you take, once your estate plan is established, it can continue to be adjusted as your financial and personal situation evolves.

Work With A Financial Advisor

If you already have a financial advisor, it is best to have them brought into your estate planning meetings. The initial process can seem daunting, with many people forgetting key details of their financial portfolio. It is understandable with all the information and questions being thrown at them at once.

Your financial advisor already has a clear picture of your finances. It is their job to be an expert on your financial goals and your assets. Utilize them as a resource to create your estate plan. 

Work With An Attorney

Many people benefit by working with an estate planning attorney – sometimes in conjunction with their financial advisor. Estate planning attorneys, commonly known as probate lawyers, specialize in the state and federal laws regarding trusts, wills, and power of attorney.

One of the main perks of using an attorney is they will help your successors avoid probate. And they are especially needed in the event that someone will contest your will. 

Make Your Own Trust For Free

A do-it-yourself trust can be done. While this is a cheaper process since there are no attorneys involved, it does take proper research and education to draw up a legal living trust. To make your trust, you will need to be prepared with all your financial documentation, beneficiaries, will, and any additional pieces you’d like included within your standard living trust.

After it is drawn up, you will need to sign it in front of a notary public. Then, to make your trust effective, you will then need to transfer all property to be distributed under its terms into the name of the trustee. You can do this by using a deed or other transfer documents.

One important thing to note, if your DIY estate planning is done incorrectly, probate may not be avoidable. 

Use An Online Service

There are a number of online services (Trust & Will for example) that can provide a similar service that a lawyer might also do, but more affordably. These online tools can provide you with comprehensive estate planning, legal updates, and software that allows you to complete your documentation process at your own pace. However, you will need to check to determine if they are valid in your state or U.S. Territory.

If you are interested in using an online service, be sure to do your research. Make sure they have all the services for your unique needs. Many will only offer forms for assets within the United States. Other, meanwhile, do not have options for business owners or living trusts available. 

Making a WillEstimate Costs
Hire An Attorney$1,200 – $2,000
Make Your Own WillFree
Use An Online Estate Planner$39+

Final Thoughts: Picking Your Estate Plan

Secure estate plans are typically created through superior teamwork. For complex estates, you would want to have your team consisting of financial advisors and attorneys work together. This way, you will create a process that runs effectively after your passing. If your estate doesn’t require the need for a professional team, consider utilizing online services or creating your own estate plan. This will provide your family with the legal documentation needed after your passing.

No matter your situation, in order to create your will and estate plan you need to complete some tasks first. Gather your personal and financial information is first and foremost. When you are ready, reach out to your financial planner, attorney, or online resource to get started today.