Guide to Estate Planning

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The term “Estate” describes everything a person owns. Think of it as a person’s net worth i.e. the sum of all their assets (investments, real estate, business interests, trust accounts, etc.) less their liabilities (mortgage, debts, etc.). In a legal sense, “estate planning,” is a way for people to control the distribution of their estate upon their death. An estate plan can be as simple as having a will and naming a beneficiary for a 401(k), or as complicated as a will that funds multiple trusts for different purposes.

There are plenty of documents that can be used to establish a person’s wishes in an unexpected event such as incapacitation or death. The top 3 essential estate planning documents are a last will, a power of attorney (POA), and a last will document. 

A last will has specific instructions for the distribution of your estate upon death.
It is the document that lists who gets what if you pass away, thereby helping avoid disagreements or additional emotional stress for your loved ones. Additionally, if you have minor children, a will can name a guardian for your children in the event of your death.

Probate is the legal process of validating a person’s will. It involves taking the will to court and having a judge rule that the will is legally binding. Once this happens, the assets can be distributed. If you die without a will, you don’t have any say in how your property is dispersed. Instead, everything will be distributed based on the laws of your state, known as intestacy laws.

There are two main types of powers of attorney, known as POAs. A general (or durable) power of attorney designates someone to execute financial decisions on your behalf. A medical (or healthcare) POA designates someone to make medical decisions on your behalf in the event that you are unable to do so. Any decisions that are not clearly included in your living will are made by the person to whom you have given POA.

A living will is used to communicate your wishes regarding certain medical treatments while you are still alive. This is a very important document as it lets your loved ones and healthcare providers know your wishes for life sustaining treatments (ie. life support) in the event that you are not able to speak for yourself.

Regardless of your wealth, you’ll want to think about the many options available to you when it comes to your assets and liabilities in the case of incapacitation or passing. In fact, estate planning covers more than just creating a last will and testament. A holistic estate planning process will also review the best strategies for setting up trusts, such as if you’re considering setting up a revocable or irrevocable trust for a loved one. It is a crucial step in your financial planning as it will give you, and those you care about, the peace of mind that comes with clarity regarding your wishes.

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