What are the Primary Goals of Estate Planning?
Introduction
“Estate planning” may sound like a grand term, the sort of thing that only the wealthy concern themselves with, but it’s actually a practical step for anyone with a family. Most of us don’t expect to die any time soon, yet being unprepared for the event can cause all sorts of legal tangles for the family that survives us.
Estate Planning
An estate plan is a way of expressing your wishes clearly for what should be done with your possessions (your “estate,” in legal terms) after your death. It includes instructions on how to take care of your family members, pets, and cherished possessions, and the legal and financial means to do so. It also includes planning for your own medical care if you are incapacitated.
Last Will and Testament
Your last will and testament is the main instrument by which you specify who will receive each of your possessions after your death. It also specifies who will receive custody of your children, dependents, and pets. Not only does this allow you to select the best person to care for them, but it also prevents strife within the family. A well-structured will prevents conflict among your loved ones after your death, because there is no question about what you would have wanted.
Financials
Estate planning provides the money needed to take care of the loved ones you leave behind. It includes life insurance, which provides the money to allow your loved ones to be taken care of when you can no longer do so in person. Other assets, such as IRAs and 401(k) plans, can often be left to survivors, so long as you have specified the recipient in advance.
In order to ensure that your will is carried out properly, you may establish a trust. This is an arrangement under which a responsible party, the trustee, takes charge of your estate and manages it on behalf of your beneficiaries. This is especially useful when your estate is complex or when your children are too young to handle money for themselves.
Power of Attorney
In addition to death, a proper estate plan also provides for cases of incapacitation. If you are unconscious or otherwise incapable of handling your affairs personally, you can arrange for a trusted person to make decisions in your stead. This is commonly done via a power of attorney.
The recipient of your power of attorney need not be a lawyer, although it’s very helpful to have a lawyer to write one. There are many types of such arrangements, including medical, legal, and financial powers of attorney.
Plan, Plan, Plan
Finally, proper planning allows for your estate to be passed on in the most efficient way possible. An estate plan can minimize estate taxes and other costs. It ensures that your estate will have sufficient liquidity to pay taxes and fees without having to compromise the valuables that you pass on to your heirs. It helps avoid having your estate tied up in probate and other delays.
Estate planning is an important step to take in order to provide financial security for your family and avoid family conflict. It’s important to take this step ahead of time to provide for your loved ones when you are no longer able to care for them in person.
