One of the most common misconceptions about estate planning is that it is only for wealthy individuals. The truth is that if you have assets of any kind, you have an estate and need to plan for what will happen to it once you've passed. Not only does estate planning ensure your wishes are followed, but it takes the onus off of your family in making decisions about your estate.
Learning more about estate planning and what is included in this process can help you to create an effective and comprehensive plan of your own.
What Is Estate Planning?
Estate planning is the process of creating and implementing directives for your assets after your passing. The documents included in an estate plan dictate the dissemination of your assets once you are gone.
Estate planning also provides an opportunity to designate the individual or entity of your choosing to administer your estate in your absence.
What Documents Should I Include in an Estate Plan?
The basics of estate planning center on several key documents: a will and last testament, power of attorney (financial and health), living will and trust documents. A traditional will is the cornerstone of your estate plan. It details everything from the distribution of assets to financial allocations. If you have small children, list your preferred guardian and name an executor of your state. The more specific your will, the better.
The next document is a power of attorney. If you have two different people in mind for financial and healthcare matters, you will need two different documents. Choose carefully as this individual will be able to make decisions in your stead if you pass or are no longer of sound mind to do so yourself.
A living will is commonly included in estate planning documents, as is a trust document. Creating a trust helps to reduce the tax burden on your family and provides a structure through which your assets can be funneled.
Why Is An Estate Plan So Important?
An estate plan can help protect your assets and provide your loved ones with the necessary documentation to process your estate after your passing. Moreover, it ensures that your loved ones are not left with any financial burdens associated with your estate.
It also allows you to make decisions about your assets, giving you peace of mind knowing how they will be distributed.
Can I Do It Myself, or Do I Need a Professional Advisor?
While it is certainly possible to create an estate plan on your own, working with an estate planning financial advisor is a better option. A financial advisor can ensure that you've included all pertinent documentation for your specific estate. They can help you make decisions about how to distribute certain assets.
Moreover, an advisor can help you structure your estate plan to assure minimal impact on your loved ones upon your passing. After all, the last thing you want is for your family to deal with complex estate matters during their time of grief.
Can Estate Planning Protect My Wealth?
When done properly, financial estate planning can include provisions to protect your wealth. There are various strategies available that can ensure your wealth remains with your family after you've passed.
Choosing the right option depends on your circumstances and is another reason why working with a financial advisor is the most prudent approach to successful estate planning.
When Should I Start Estate Planning?
The best time to start estate planning is now. For example, if you own a home, that represents a significant investment and asset within your estate. Your financial accounts are part of your estate, as are any monetary savings you might have. If you have minor children, estate planning should be a priority as well. It is never too early to secure your family's future.
How Do I Get Started?
Start by finding a qualified estate planning financial advisor. Gather pertinent documentation on all your assets as well as financial statements, identifying documents, and any other relevant information necessary for the planning process.
Choose your beneficiaries and outline your wishes. An experienced advisor can walk you through the entire process and help you make it official. Be sure to revisit your estate plans periodically to ensure that you are still comfortable with your decisions and to make any necessary changes.