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Understanding Estate Planning

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Understanding Estate Planning

understanding estate planning basics

Who Needs Estate Planning?

Many people, when they hear the words “estate planning,” don’t think it applies to them. “I don’t have an estate to plan!” they may say. I think this comes about from the use of the word estate. It makes us think of the show Lifestyles of the Rich and Famous where Robin Leach showed us massive estates and talked of the excess spending by the ultra-wealthy.

But according to Merriam-Webster, the simple definition of estate is “all of the things that a person owns.” Thus, your estate is the sum of your stuff: your home, your bank accounts, your stocks and bonds, your cars and boat, and your personal property. Big or small, most adults have an estate of some sort. If you don’t plan for it, don’t worry, the state has a plan for you. It just may not be what you want.

What young couples with children may not consider is that their estate also includes the life insurance policies that they took out to provide for their children if they aren’t around. At death, that life insurance policy may be the biggest part of the estate. Planning for how it will be managed and spent for the children is crucial!

Estate Planning is More than Distributing What You Own at Your Death

While a large portion of estate planning is determining how your estate will be distributed at death, a good estate planner is doing much more. The estate planning professional should assure that you have the right things in place in case you become incapacitated. Who will manage your assets and your financial affairs if you can’t? Who will make decisions about your healthcare? With proper planning, you decide that. You also put in place the documents that person needs in order to quickly take charge and see that you and your finances are taken care of. Without proper planning someone will have to ask the court to appoint them as conservator of your finances and guardian of your person. You can’t guarantee it will be who you would choose. I can guarantee it will be a time-consuming, expensive and public proceeding for you and your family.

Putting an Estate Plan in Place Means More than Writing a Will

As you may already have surmised, a Will isn’t going to be enough. If you are alive but can’t take care of your financial matters, a Will doesn’t help you – it’s only effective upon your death. Instead, you need a Will along with a whole series of other documents to assure that you have a proper estate plan.

For someone to handle your financial affairs while you are incapacitated, you need a Durable Power of Attorney. You need a Healthcare Power of Attorney to appoint who you want to make health care decisions if you can’t. At my office, we also do a general release to permit your financial and health caregivers access to your medical records, which can be difficult with the federal HIPPA laws preventing disclosure.

Avoiding Probate at Your Death Is Important Too

Most of my clients come in wanting to avoid probate. This is an important part of estate planning as well. We have several methods to do this, all of which protect you while you are still living, but still provide for an easy distribution at your death. Homemade probate avoidance techniques, like putting one of your children as a joint owner of your bank accounts or other assets, can have disastrous consequences. Estate Planning is one place where getting an expert involved can save your family great time, expense and heartache.

Revocable Living Trusts are Great for Incapacity Planning and Distributing Your Assets

One of the most effective ways to address planning for your incapacity and for your death is the Revocable Living Trust. The Revocable Living Trust is a great way to address incapacity and to make an easy distribution of your assets – all without court intervention. The Revocable Living Trust:

  • Is controlled by you until you are incapacitated or pass on
  • Is readily accepted by financial institutions
  • Provides detailed instructions and directions from you to your successor trustee
  • Holds your successor trustee to a high fiduciary standard
  • Allows your successor trustee to quickly and efficiently begin managing your assets to care for you and your finances, or to manage and distribute your assets on death

Learn More About Estate Planning

Learn more about estate planning and find out if what you have in place is enough for your family or loved ones to easily care for you and easily manage your estate when you are gone. An easy way to learn more is to attend one of my informational seminars on the Myths and Mistakes about Estate Planning. Look at my events page for more information. We are currently holding the seminars periodically at the Mesquite Public Library, 4435 East Paradise Village Parkway South, Phoenix, Arizona.

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