Even finance enthusiasts cringe at the mention of estate planning. Few topics make us more uncomfortable, and for good reason. Estate planning forces us to acknowledge our mortality and accept that our assets will likely be around longer than we will. However, estate planning isn’t as scary as you think, and it may even bring you some relief. Review this estate planning 101 guide to learn everything you need to know about this important topic.
If you need assistance with your finances, work with a professional financial advisor from Good Life Financial Advisors of Mt. Pleasant. We’re ready to help create a personalized plan for your specific needs.
Organizing Your Assets and Affairs
The purpose of estate planning is to make sure your final wishes are carried out with as little friction as possible. Without proper a plan, your assets could become ensnared in a lengthy court battle, bequeathed to the wrong heir, and/or divvied up by the state. Here are a few important components of an estate plan:
- Last Will and Testament
- Living Trust
- Power of Attorney
- Advanced Medical Directives
These four documents will contain your directives as to where your assets go, who becomes guardian of your children and pets, and how your medical care will be distributed should you become incapacitated. All four of these won’t be needed by everyone, but these are the crucial legal documents that put our final wishes into law:
Last Will and Testament
The will is probably the most common document used in estate planning. At the bare minimum, everyone should have a Last Will and Testament drawn up, especially if substantial assets and children are in the picture. A will is easy and affordable to set up and can be used to assign a guardian to your children, leave assets like stocks or property to your heirs, and determine debt repayments and funeral costs. But wills do have drawbacks. Your affairs will need to be settled in probate court since wills are a matter of public record. That means an unsatisfied heir has the capability to challenge the will in court.
A trust is a more ironclad version of a will. Everyone needs a will, but a trust is required only if you absolutely want to keep your affairs out of probate court. Additionally, trusts can be utilized for specific situations, such as leaving assets to the next generation (grandkids) or special needs children. Trusts are more expensive to set up than wills, and unlike a will, a trust must be funded with the assets you wish to distribute. If you plan to leave your home to your oldest child, you must transfer ownership of the property to the trust. A trust that can be altered is known as a revocable trust, but irrevocable trusts are set in stone and cannot be changed.
Power of Attorney
If you become incapacitated or can no longer make decisions for yourself, the person you grant power of attorney will be able to make decisions on your behalf. With power of attorney, your designated person will be able to represent you in both financial matters and medical decision-making. Use caution when assigning power of attorney because you’ll be signing over your personal and financial well-being completely to another person.
Advanced Medical Directives
Advanced medical directives are documents stating which types of medical care you’ll accept and which types you’ll refuse. This includes items like Do Not Resuscitate (DNR) orders, ventilator or dialysis use, pain meds, palliative care, and organ donation.
One of the most overlooked aspects of estate planning is the role taxes will play in the distribution of your assets. A living trust might help keep your assets out of the courts and public records, but taxes will still need to be paid, and these can vary by estate. Additionally, a specific death tax will be applied to your estate if your assets are appraised at a value over $11.18M. Tax preparation cannot be overlooked when planning your estate, unless you don’t mind leaving your beneficiaries with complicated tax bills along with your distributed assets.
Solidify Your Estate Plan with Your Advisor
Estate planning isn’t something you should take a DIY approach to. A will might be simple enough to set up on your own, but if you want to leave specific instructions in regards to your health and wealth, you’ll need the assistance of an experienced advisor. Estate planning is an all-encompassing process that must take investments, property, offspring, taxes, medical care, and funeral arrangements into account. The idea of departing this world is heavy enough, so always turn to your advisor for assistance with your estate planning needs.
Contact Good Life Financial Advisors of Mt. Pleasant
We hope this estate planning 101 guide has helped you learn everything you need to know about this important topic. If you have any remaining questions or need assistance with your finances, reach out to a team member from Good Life Financial Advisors of Mount Pleasant today.
This information is not intended to be a substitute for individualized legal or tax advice. Please consult your legal/tax advisor regarding your specific situation.
Good Life Financial Advisors of Mt. Pleasant and LPL Financial do not provide legal advice or services. Please consult your legal advisor regarding your specific situation.