Do you know these facts about estate planning?

Q:

I know that I should do some estate planning, but how do I get started? How do I know whether I even have enough assets to create one? What about trusts versus wills? 

A:

If the words “estate plan” sound like you must be a Rockefeller to have one, think again. Everyone needs an estate plan regardless of the amount of assets you have and plan to leave.

You can protect your assets after you pass by having a will or a trust, but there are other estate plan documents that help protect you and your assets even before that.

What’s in an estate plan?

An estate plan will provide a legal structure for distributing your property, but it also includes documents like a durable power of attorney, a medical directive and a health care proxy.

A medical directive will tell medical personnel how you want to be treated in the event you’re incapacitated.

So, if you assume that you don’t need an estate plan because you’re a widow and have no children, think again.

A health care proxy lets you designate a family member or friend who can make your health care decisions if you’re not able to on your own. Meanwhile, granting someone power of attorney will let them manage your finances, like paying your bills, if you’re similarly incapacitated.

What about wills and trusts?

To be sure, the most common estate vehicle used to distribute one’s property after death is a will. A will is simply a legal document that instructs how your assets will be distributed after you pass, but we also recommend trusts to clients, specifically revocable living trusts.

Revocable means you can change your mind about any aspect of the trust, such as who gets your property. Life happens. Circumstances change, and so can people.

When you pass, a revocable trust allows your assets to pass to your spouse, children and other heirs without them having to go through probate court. A will needs to be confirmed as your last will and testament by a probate court after you pass before assets can be distributed by the will’s executor. Probate can take anywhere from several months to years. A trust not only can help distribute your assets faster, it also avoids related probate costs and potential publicity (probate is a public process; trusts can keep everything private).

Some folks need additional documents, such as a marital trust. Its purpose is to reduce estate tax liability, but frankly, if your net worth isn’t in the eight figures, you probably don’t need this trust. There are many other kinds of trusts available. For example, if you have an heir who would squander any money you provide, a spendthrift trust can dole out the inheritance as an allowance instead.

Then again, a straightforward will could serve your needs better. Bottom line: An estate plan can be configured to suit your goals and circumstances.

Just ask us for help

You needn’t be an expert in estate planning, so don’t waste your time trying to become one – unless you plan to get a law degree. Instead, all you need to be is an expert in your personal situation.

Know what your property is and how you want to dispose of it. After learning your concerns and hopes, your financial planner can work with you and an estate planning attorney to help you design an estate plan. Edelman Financial Engines has estate planning specialists who can provide guidance. We can also refer you to an estate planning attorney in your area. It’s probably not as difficult as you think, so reach out and let’s get started.

WE HOPE YOU’VE FOUND THIS INFORMATION HELPFUL

Remember that any financial guidance must be adapted to your unique circumstances, so consult your financial planner. In the meantime, keep those questions coming!