Estate Planning: A Key Part of Any Financial Strategy

I sometimes hear from clients that estate planning sounds like something that only the very rich need to think about. This couldn’t be further from the truth. In reality, an estate plan is, at its most basic, a critical part of ensuring that your wishes are carried out should you become incapacitated or pass away. This applies to large estates, small ones, the elderly and the young. The fact is that everyone over the age of 18 should have at least a basic plan in place.

The most fundamental components of an estate plan are a durable power of attorney, in which you name someone to manage your property if you cannot, and an advanced medical directive. An advanced medical directive can be a living will, a health-care proxy, or a do-not-resuscitate order. These documents, which you should craft with an eye towards your local laws, are the foundation for ensuring that your wishes are carried out should the worst come to pass.

From here, you should consider establishing a will, trust, or both depending on your marital status, age, and whether or not you have children. For example, unmarried couples might consider making property purchases jointly and establishing wills to ensure that each partner is protected should one die. Married couples with children should also have wills and might consider establishing a trust to manage any assets inherited by their children.

A will simply dictates who gets what and how your assets are to be distributed. Trusts, on the other hand, are useful for minimizing federal estate taxes and provide for asset management assistance for your heirs. They can help you avoid the costs of probate and will keep the distribution of your estate a private matter. A trust can also ensure that your assets are distributed to all of your intended beneficiaries, such as children from a previous marriage or a current spouse.

Of course, whether or not a trust is right for you is a matter of individual need. Each situation is unique, so the first step to successful estate planning is to get the legal, tax, and insurance expertise you need. From there, you should consider your goals and requirements, and then begin to develop your plans and craft your documents.

As you can imagine, depending on the complexity of your assets and family structure, this can get pretty complicated! However, it’s worth taking the time to wade through the financial issues and to really think about the difficult questions, which include some uncomfortable ones. For example, who would become your child’s guardian in the event of you and your spouse’s/partner’s death? Would you want to be kept on life support for as long as possible? Unappealing as these thoughts and conversations can be, taking the time to plan for these contingencies will provide your family with structure, guidance, and a measure of security should the worst happen.

Of course, once you develop an estate plan, the last thing you want to do is forget about it! It is critical to revisit your estate planning documents regularly and update them for developments in your life, including your marital status and family situation, property ownership or major transactions, new employment or business interests, the death of an appointed trustee/executor/guardian, and many others. I recommend that you conduct a review of your estate plan upon any major life event and at least annually for large estates and every five years for smaller ones. This will help to ensure that your documents are always up to date with respect to your personal needs and any applicable tax or estate laws, which often change.

Ready to get started with estate planning? Read this detailed Basic Estate Planning guide, which provides more information about the issues noted above as well as other factors and considerations that you should keep in mind as you put together your plans. If you decide from there that you’d like to begin putting together simple documents and don’t believe you need legal guidance, you can try one of the many available online resources that provide document creation assistance at a low price. One example is Legal Zoom, which offers wills, trusts, and a variety of other legal documents.

If you are seeking detailed information about rolling over your 401(k) or about managing your IRA, I highly suggest downloading my free eBook, “10 Tips You Need to Know About Your IRA Rollover”. This short book is packed with critical information that will help you make the right decisions about your retirement savings.

Written by Bradford Pine
Bradford Pine Wealth Group – New York City Financial Advisors

The views and opinions expressed in an article or column are the author’s own and not necessarily those of Cantella & Co., Inc. It was prepared for informational purposes only. It is not an official confirmation of terms. It is based on information generally available to the public from sources believed to be reliable but there is no guarantee that the facts cited in the foregoing material are accurate or complete.

Comments may not be representative of the experience of other investors. Investor comments and experiences are not indicative of future performance or results. Views and opinions expressed in the comments section are the author’s own and not those of Cantella & Co., Inc. No one posting a comment has been compensated for their opinions.