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  • Raemi L. Gilkerson and Rachel J. Leos

Estate Planning Series: Estate Planning Basics

This is the first blog post in a series on estate planning. You can expect future posts to cover other estate planning topics (for example: when is it time to update your estate planning?)

People are often confused about what an “estate plan” actual is. In this post we want to provide information about estate planning basics.

What is Estate Planning?

From our perspective, estate planning is a series of tasks that you do to prepare for incapacitation (unable to make decisions for yourself) and/or death. It is an ongoing process that should be started as soon as someone turns 18 and is modified throughout a person’s life based on life events, circumstance and wealth. If you are expecting a child or have recently had a child, you should start the estate planning process right away. See our New/Expecting Baby Checklist. As life progresses goals change and/or the law changes, the estate plan should be modified to move in line with new goals. Lack of estate planning can cause unnecessary and unexpected financial and emotional burdens and hardships on loved ones.

What is an Estate?

People often think that estate planning isn’t necessary for them because they don’t have an estate. If you own ANYTHING, truly anything (a pair of shoes, $1, a car, a house, etc), you have some form of an estate. Now the value of your estate might not be much, but you have an estate.

Legally, an estate is the net of a person’s assets less any liabilities at the time of their death. What does this mean? It is the value of all of your “stuff” minus any debts or obligations you have. The “stuff” includes any real estate you own, bank accounts, retirement accounts, life insurance, business interests, cars and personal property in your house (furniture, clothes, jewelry, collectibles, etc). We add the value of all the “stuff”, subtract the value of any liabilities you have (mortgage, other loans, etc) and that is the value of your estate.

Estate Planning Documents

In most cases, we recommend each person execute a Will, Durable Power of Attorney, Health Care Power of Attorney, Health Care Directive and if you have minor children, Powers of Attorney for their Minor Children. Depending on the situation, we may prepare a trust or a trust contained within a Will. Below are definitions of each of these documents:

  • Last Will & Testament (“Will”): A Will is the document in which you direct how your assets will be distributed upon your death and who will manage your estate. The person you chose to manage your estate is called the Personal Representative or Executor. If you do not have a Will at the time of your death, a state law will direct how your assets are distributed upon your death. Believe it or not, in most cases, distributing assets without a Will is more expensive than with a Will!

A Will can also direct who you designate to care for your minor children until they reach the age of majority (18).

  • Guardian of minor children: The guardian for a minor child is the individual who is legally responsible for the minor child’s day-to-day care, including the child’s physical care, health and education. You name a guardian for your child in a Will.

  • Durable Power of Attorney for Assets: This document appoints someone else to handle your financial affairs in the event that you become unable to make financial decisions or communicate those decisions during life. Examples of tasks a financial power of attorney can complete include: paying your mortgage if you become incapacitated or selling your house on your behalf if you are out of the country, are too sick or incapacitated to do so.

  • Durable Power of Attorney for Healthcare: If you are unable to make informed health care decisions on your own, the healthcare durable power of attorney lets you appoint one or more individuals to make important healthcare decisions for you.

  • Health Care Directive or Living Will: This document allows you provide instructions on end of life measures and provides the health care power of attorney direction in making decisions on your behalf.

  • Trusts: There are many types of trusts which serve various purposes. For example, placing property in a trust can avoid probate or hold assets for a young beneficiary you designate until he or she is old enough to manage the property. Trusts are also used for estate and inheritance tax avoidance purposes.

  • Transfer on Death Deed: A deed that can transfer real property (real estate) to a named individual immediately upon death of the owner of the real property.

Additional Estate Planning Tasks

As attorneys our job is to prepare the legal documents; we also work together with financial advisors and CPAs for financial planning and to minimize taxes.

In this capacity as attorneys we might deal with:

  • Minimizing estate taxes

  • Creating/updating beneficiaries on life insurance, IRAs and 401(k)s

  • Establishing annual gifting plans

Disclaimer: The information in this blog post (“post”) is provided for general informational purposes only, and should not be construed as legal advice from Leos & Gilkerson, PLLC or the individual author, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting on the basis of any information included in, or accessible through, this Post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a licensed lawyer.

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