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What is Estate Planning?

| Feb 28, 2024 | Estate Planning

What is Estate Planning?

Estate planning is essentially creating a plan for your assets. An estate could be modest or substantial, including vehicles, homes, investment properties, retirement funds, bank accounts, life insurance, and personal belongings like furniture, clothing, and kitchenware. When you pass away, none of it can be taken with you, which raises the question of what happens to it. The answer to this question depends on your actions now; estate planning is a proactive way to plan for the future.

Your proactivity means planning in advance, naming the people you want your estate to go to (or not go to), the organizations and charities you want to support, and the people you want to carry out your wishes.  However, effective estate planning goes beyond just assigning beneficiaries. It involves outlining your funeral preferences, appointing guardians and conservators for yourself and your underage children in the event of incapacitation or premature death, giving guidance for end-of-life decisions, ensuring the care of children with special needs, making provisions for loved ones who struggle with financial responsibility, and various other important considerations.

Should I have an Estate Plan?

It’s a common misconception that estate planning is only necessary for the elderly or retired. In reality, anyone who owns something of value, even if it’s just sentimental, should have an estate plan in place. This includes parents – especially if they have minor children, young married couples who have purchased their first home, blended families, and business owners who want to leave a legacy – to name a few. Unfortunately, around 77% of U.S. adults put off estate planning because they believe they do not own enough, do not have enough money, or are not old enough. However, no one can predict when unexpected events, illnesses, or accidents may occur, so estate planning is essential for everyone. The answer to the question is yes, you should have an estate plan.

What Makes up an Estate Plan?

An estate plan consists of four primary components: a will (or pour-over will), a trust agreement, patient advocate designations, and powers of attorney. Let’s look at these individually.

A will, also referred to as a last will and testament, is a document that provides instructions to both the court and your heirs regarding how you want your assets to be divided. It serves as a guide for your heirs to follow – although it does serve as a guide, a will is still very limited in some ways. One limitation to consider is that your heirs will receive a lump-sum distribution as soon as the funds are available. If they are minors at the time of your passing, then they get a lump sum the day they turn 18 years old – for many young people this could cause irreparable damage by not having the life skills or brain development required to handle large sums of money. By using a trust, this scenario can be avoided.  A pour-over will is similar to a regular will, but it is used in conjunction with a trust; it ensures that any assets that were not included in the trust are transferred to the trust – which then gets distributed according to the terms of the trust agreement.

A trust is a legally binding agreement that allows a trustee to hold title to your property. By using a trust, you can avoid probate, maintain control over your assets even after you pass away, protect your legacy, maintain privacy, set limitations, requirements, or benchmarks for distributions, and save on probate costs.

Patient Advocates assist patients and their loved ones by providing guidance in navigating the healthcare system, communicating with doctors, and making important medical decisions when the patient cannot do so.  The patient advocate designations provide clear directions for end-of-life decisions, which is crucial when situations are emotionally charged.  By providing clear instructions, you can limit and prevent disagreements among your family members regarding your end-of-life wishes. This will give them the reassurance they need to know what actions to take in accordance with your preferences.

A durable financial power of attorney allows an agent – whom you designate, to manage your finances when you are no longer competent.  Your appointed agent will be able to handle tasks such as filing your taxes, paying your bills, and ensuring the smooth operation of your business, among other things. With a broad power of attorney, your agent can act on your behalf and manage your finances as if they were you. However, you can also set limits on their authority if you only want them to make specific financial decisions.

When is the best time to act?

The optimal time to act is now.  Most of us tend to avoid thinking about our own mortality or the chance of being incapable of making decisions. This is precisely why many families find themselves unprepared and caught off guard when incapacity or death does occur. It is important not to delay planning for such situations.  It is a good idea to create an estate plan that can be adjusted as your life changes. We suggest reviewing your plan every 3-5 years to ensure it still meets your needs.

Where does Estate Planning all Begin?

It all begins by sitting down with a professional who understands your goals, both in life and after you pass away. By getting a clear picture of what is important to you, we can design an estate plan that fits your goals perfectly.


Jesse Bergwerff