National Estate Planning Awareness Week was adopted on September 27, 2008 to help the public understand what estate planning is and why it is such an important component of financial wellness.
Estate planning is the process of creating a strategy for the management and transfer of an individual’s wealth in a way that is legally valid and enforceable. The goal is to develop a plan that will maintain the financial security of an individual through his or her lifetime and ensure the intended transfer of the person’s property and assets at death. An estate plan should also take into consideration the unique circumstances of the family and the potential costs of different methods.
We typically think of estate planning as the preparation of written documents like wills, powers of attorney, and trusts. A will, also known as a last will and testament, is a legal document that coordinates the distribution of your assets after death and can also appoint guardians for your minor children. Failure to prepare a will may leave these decisions in the hands of judges or state officials and may also cause family strife. Furthermore, your heirs may end up spending additional time, money, and emotional energy to settle your affairs after you’re gone.
A power of attorney (POA) is a legal document that allows you to appoint a person(s) or entity to manage your property, medical, or financial affairs. Several different types of POAs exist to serve different purposes. These include, durable, non-durable, springing, general, limited, and medical POAs. Be sure to talk to a professional to ensure you have executed the proper POAs for your situation. In many cases, a durable financial POA and medical POA (or an advanced health care directive) are necessary to make sure your financial and medical affairs are taken care of in the event that you are incapacitated.
A trust is a fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of a beneficiary or beneficiaries. Trusts can be arranged in many ways and can specify exactly how and when the assets pass to beneficiaries. They may be used to control your wealth, protect your beneficiaries, provide for special needs beneficiaries, offer privacy from probate, reduce estate taxes, etc. While I can make an argument that most people need a will, a financial POA, and a medical POA, the same might not be true for a trust. They are certainly helpful in many circumstances, but not necessarily needed by everyone. An estate attorney can help you determine if a trust is the right fit for you.
While the documents discussed above are at the center of estate planning, there are other items that are important as well. Two of these are beneficiary designations and account ownership titles. You may have a will, POA, and trust set up properly, but if your beneficiary designations and account ownership titles are not in sync, your whole estate plan may be derailed.
Estate planning can seem like a daunting task for many individuals. Because of that, many tend to procrastinate or come up with excuses as to why it’s not necessary. But remember, estate planning is not just for the elderly and/or wealthy. It’s the ultimate way you can convey your love and care to those closest to you. It will also give you a sense of control and the feeling of peace of mind. If you have kids and you don’t have a will, it could be up to the courts to decide who takes care of them if you die. If you’re in a relationship but not married, your partner could get left out in the cold if something happened to you.
If you haven’t completed any estate planning, I encourage you to take the next step and schedule an appointment with an estate attorney. If you do have an estate plan in place, use this week to make sure your beneficiaries, account titles and planning documents are all up to date. If you have questions, please don’t hesitate to reach out to your advisor at BCS Wealth Management.
