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Your Guide to Estate and Trust Planning


Learn more about estate planning in our estate planning guide.

Everyone who owns anything of value or has dependents who need medical care should have an estate plan. While the majority of people agree that having an estate plan is crucial, many are not sure why such a plan is necessary for future affairs.

Some think estate plans are only for the wealthy because they have more money at stake, while others think estate planning is important but too expensive to invest in. Regardless of your age or wealth, your belongings will need to go somewhere after you pass away, and thus, having a plan is important.

If you were to die without an estate plan, your estate will move to probate court, which means state laws will determine what happens to your assets. Guardianship nominations for dependent children and beneficiary designations will go by court appointment. This time-consuming, stressful, and costly process is done without wealth preservation or personal preferences considerations.

An estate plan determines who receives your property after your death. It describes the kind of care you want if you were to become incapacitated and makes proper arrangements for the care of minor children. The main goal is to protect your heirs, guard your preferences, and defend what you’ve worked hard to achieve. In this estate planning guide, we’ll cover the basic elements of an estate plan and the steps you’ll need to take to set up an estate plan.

What is an Estate Plan?

An estate plan is a collection of legal documents that outline what happens to your assets after you pass away, as well as how your affairs should be handled when you can no longer take care of yourself. An estate is comprised of the property, money, and investments you own. If you have an income, a home, a car, land, life insurance, bank accounts, antiques, family heirlooms, or any other personal property, then you have an estate.

If you don’t specify who gets what, you’ll leave your loved ones in a difficult situation. Who’s taking ownership of your home? Who receives your sentimental keepsakes and family heirlooms? What if your son wants to move in, but your daughter prefers selling the house and dividing the equity?

Such disputes can lead to time-consuming, costly, and drawn-out legal battles. Or worse, your assets could end up going to unintended beneficiaries or the state. An effective estate plan can make life a lot easier for your loved ones.

Estate Planning Goals

To successfully complete and execute your plan, you need to have a clear idea of how you’d want specific assets to be handled following your death or incapacitation. Some of the goals an estate plan can help you accomplish include:

  • Name the family members, friends, or organizations you want to receive your property after you pass away.
  • Name the person who can act as your proxy, distribute your assets, and settle your estate.
  • Specify your medical care preferences should you become incapacitated.
  • Dictate how your business will be managed in the future.
  • Express your wishes for funeral arrangements and payment of related expenses.
  • Name guardians for minor or disabled children and lay out a plan for their financial support.

You can accomplish these goals using wills and trusts. While a will is an important tool when it comes to asset distribution, it does not offer certain additional protections that a trust can.

Essential Documents That Make Up an Estate Plan

While each estate is unique, there are five documents each state plan should have:

  • Last Will and Testament

A last will and testament, or more simply a will, lets you:

  • State who will acquire your assets after your death
  • Name guardians for minor children
  • Name an executor who will file the will in probate court, oversee the disbursement of your assets and ensure your wishes are carried out.

A will is the most important part of an estate plan.

  • Durable Power of Attorney

A power of attorney allows you to name a person who will make legal, financial, and medical decisions on your behalf. They can handle legal matters, file taxes, make mortgage payments, manage your bank accounts, or oversee healthcare arrangements. Without this document, a court would have to appoint a guardian or conservator to represent you and act in your best interests. For peace of mind, you may want to name someone you already trust.

  • Advance Health Care Directive, or Living Will

A living will is a document that outlines healthcare and treatment considerations when you become incapacitated and are unable to communicate your wishes. It often includes details about life support and care preferences in the event of a coma, terminal illness, or vegetative state. Other state-specific specifications such as Physician Orders for Life-Sustaining Treatment (POLST) and the Do Not Resuscitate (DNR) directive can be made here as well.

  • A Trust

A trust is a legal arrangement that allows you to puts aside money or other assets for your heirs or charity organizations. A trust is the best way to avoid probate, which can be a long and frustrating process for grieving families.

Trusts can be revocable or irrevocable. Assets moved into an irrevocable living trust are no longer part of your estate, which means your federal estate tax will be reduced. With a trust, you can indicate how and when you want your assets passed to beneficiaries. For example, you may want your grandchild to finish college before receiving inheritance “ABC.”

  • Letter of Instruction

Also known as an ethical will, the letter of instruction is a plain English summary of your will. It isn’t strictly necessary, but it can help your loved ones understand what your exact wishes were.

How to Create Your Estate Plan

Take Stock of Everything You Own

The best way to start estate planning is to list everything you have, including;

  • Business you own
  • Bank accounts
  • Automobiles
  • Real estate property
  • Retirement accounts
  • Checking and savings accounts
  • Investment accounts
  • Health savings account
  • Insurance policies
  • Passwords and email accounts
  • Digital assets, like cryptocurrency
  • All debts you owe

Design a Plan

Once you have a record of all your assets, the next step is to create a plan. You’ll want to name beneficiaries and decide who gets what.

Your beneficiaries can be immediate family members, but you could also include your grandchildren, nephews, nieces, a lifelong friend, or others. It’s up to you. It’s also important to think about who would want to receive your assets if something happened to your primary beneficiaries.

Outline your end-of-life and medical care decisions if you’re incapacitated and outline your funeral wishes. Choose your estate executor. This is someone who will carry out the instructions of the will. No particular expertise is required, but financial understanding and personal familiarity will help.

Execute the Plan

Executing your estate plan is all about making it official. You will sign some documents and notify everyone involved in the plan. It makes a huge difference when beneficiaries understand where legal documents and assets are and the dynamics of the distribution of assets.

Keep Your Plan Updated

You cannot execute and forget your estate plan. It’s important to review it periodically and keep it up-to-date. Your life circumstances could change, and so could state statutes. Plan to check your estate plan every year and after major life events like:

  • Marriage
  • Divorce
  • The birth of a child or grandchild,
  • Change in employment
  • Adult child facing divorce
  • Purchase or sale of property
  • Death of beneficiary
  • Change in physical or mental health

If there are no major life changes, stick to your plan.

Work With a Certified Public Accountant at BAAP CPA 

Setting up an estate plan can feel overwhelming, and the more complex cases come with unique headaches. Any financial or legal errors can create risks and complications for your loved ones. Why go through all the hassle when you can work with professionals to help with your estate planning?

BAAP CPA offers the right preparation and knowledge to make sure your estate plan coordinates with your financial accounts and savings plan. Contact us today to schedule a no-cost consultation and let us help you properly plan for the future. We will also assist with business advisory service and tax planning services. 

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