Helping Ordinary People Be Extraordinary With Their Money
What is Estate Planning and What’s Included in an Estate Plan?
An Estate Plan is the instructions describing how to distribute your property and your money, among survivors, when you are no longer here, or no longer capable. And the fact of the matter of life is: you will die. Whether you want to talk about it or not, whether you want to believe that somehow you are going to escape death and live forever, or not, planning for what happens after you leave here, is important. You can avoid taxes, but you can’t avoid death.
Estate Planning helps you prepare for the inevitable by creating an Estate Plan.
Many people think estate plans are for the wealthy. Well the truth is: if you have assets then you have an estate. Your estate includes all of the money, property, jewelry, cars, houses, land, retirement plans, investments, and savings accounts, that you own. Whether or not you are rich or poor is not the issue. The issue is, do you have something of value and do you want to control what happens to it when you die? If the answer is no, then an estate plan is not for you. If the answer is yes, then you need an estate plan. The primary reason for an estate plan is to give YOU control over your assets, instead of allowing your assets to go into probate where the state will decide what happens to your stuff.
Besides giving you control over how your assets are to be distributed, estate plans can also provide instructions on the care you want to receive if you become incapable of caring for yourself. This is typically written into a well-crafted estate plan.
With that said, just about everyone needs an estate plan, but very few people actually have one. An estate plan can run you anywhere between $1,500 and tens of thousands of dollars, depending on the vastness of your estate. For the average person, a good solid estate plan may run you around $2,000 to $3,000, and it’s worth every bit of it! Estate Planning is about leaving a legacy and providing for generations that will survive after you are long gone. This takes planning, forethought, a vision, and MONEY.
Here are 5 Elements of a good Estate Plan:
1. Trust - A Trust, as a part of your Estate Plan, is a fiduciary arrangement that allows a third party, called a Trustee, to hold assets on behalf of a beneficiary or beneficiaries. A trust is a legal vehicle to pass assets through to a Trustee, who holds those assets in a “trust fund”. Choosing a "Trustee" is very important and there are various potential avenues for deciding on a trustee. Discuss your options with your attorney.
2. Last Will and Testament is a legal document where a person expresses their wishes as to how their property is to be distributed at their death. A Will names one or more persons, called an Executor, to manage the estate until its final distribution. A Will can be created separate from an Estate Plan, and is usually a less expensive alternative to a full blown estate plan. However, a Will is typically an intrical part of a well-thought out estate plan and allows you to be as specific as you want to be when carrying out your wishes.
3. A Durable Power of Attorney for Finance is a legal document that grants someone legal authority to act on your behalf for financial issues, if you are unable to do so. The fact that it’s “Durable” simply means that the document stays in effect if you become incapacitated and unable to handle matters on your own.
4. A Power of Attorney for Health Care is a legal document where you designate someone to be your representative, or agent, in the event that you are unable to make, or communicate, decisions about all aspects of your health care.
5. Life Insurance is a contract between an insurance policy holder (you) and an insurer (the insurance company) where the insurer promises to pay a designated beneficiary a sum of money (the benefit) in exchange for a premium, paid by you, upon the death of the insured person (you). Life insurance is the low hanging fruit that many people have, but most people don’t have enough of. Get a good term life insurance policy. Nowadays term life insurance is very inexpensive. If you are reading this and don’t have a term life insurance policy, get it immediately. Life insurance by itself is incredibly important, and is the cornerstone of a good estate plan.
The bottom line is: Everyone has stuff and everyone is going to die.
Therefore, do your due diligence and consider discussing an Estate Plan with an attorney. They are affordable and well worth it for your loved ones that will be the survivors when you die. Having an Estate Plan adds another level of security and peace to your life and the lives of those who will be here when you leave, and Its money well spent.