What Is Estate Planning And Why You Should Have It Done

It may seem morbid to prepare for your death while you are in good health and are looking at many more years in front of you, but this is actually quite a practical thing to do. Because we don’t know when it will happen, it makes sense to make these kinds of arrangements in advance.

This is particularly important when it comes to your assets. You worked hard for these properties, so it is only right that you have the final say on what to do with them once you are gone. It also makes things easier for the loved ones who are left behind, because there would be specific instructions on how to handle your estate when this time arrives.

All these preparations are included in estate planning, which essentially discusses property distribution and allocation, as well as other personal matters like tax planning. This can be a tedious process, which is why it is best to work with a professional advisor such as a trust administration lawyer who is familiar with your goals, concerns, assets, and even your family structure.

What Is Estate Planning

While the top of mind understanding of estate planning is about distribution of assets after death, there is much more to it than this. Estate planning also covers important decisions in the future such as assigning a guardian for minors who will be left behind, designating a healthcare power of attorney, and other similar topics.

In summary, an estate plan is a set of documents that clearly outlines your intentions in case of death or debilitation. You could choose between either setting a will or a living trust, depending on your objectives. Discuss your options with your chosen advisor so you can make an informed choice.

Some state laws may also supersede your instructions, like in the case of spousal rights and forced inheritance laws versus the contents of a will. Your advisor would be able to help you review your beneficiary designations as well as give you advice on which arrangement is better suited for your circumstances, thus preventing any conflict or dispute that may arise after your death.

Why You Need Estate Planning

There is a common misperception that only the wealthy need to do estate planning. But the truth is that as long as you have assets under your name, it is best to set a document that specifies what happens to them after your death. If you have a family, especially with kids, the need for such a document goes even higher.

When something happens to you while you don’t have a valid document in place, the state will be the one to determine what happens to your properties. This may vary depending on the state, but the typical arrangement would be that the spouse and offspring would get them first, followed by other family members.

By default, the legislature would assess how you would most likely distribute your property, and may or may not reflect your actual wishes. Having a legal document would give you more control over your assets while also preventing any conflict that may arise from a state-mandated asset allocation.

Aside from this, estate planning is useful not only in case of death. If something happens to you that renders you incapacitated, your estate planning would also help you facilitate the distribution of your assets, the power to make decisions for your medical care, and other important decisions that need to be addressed during this time.

How To Prepare For Estate Planning

Before meeting with a professional advisor for your estate planning, you need to make some preparations to help facilitate your discussion. This starts with an itemized inventory of your assets, which means any item you own that may be of value such as appliances, jewelry, antiques, vehicles, gadgets, and others.

Your inventory should also include intangible assets like stocks, life and health insurance policies, bank accounts, and other investments that you may have. For documentation purposes, include the account numbers and the contact person who handles your accounts in these firms.

After summarizing all your assets, you should also take inventory of your outstanding debts which include unpaid credit card balances, loans, mortgages, and any other obligations that will be due for payment upon your death. As with the intangible assets, list down the account numbers and contact person for each debt.

If you are an active member of any credible and large-scale associations like a professional organization or an alumni group, it may be a good idea to include them on your list. These associations may have benefits for members that should be included in your asset inventory.