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Estate Planning Basics

| January 03, 2022
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Estate Planning is the process of making plans for the management and transfer of your estate after your passing using a will, trust, insurance policies and other devices. Creating an estate plan makes it clear as to the way you would like everything to be handled or what your loved ones will receive when the time comes. A well-prepared estate plan will lay out your wishes exactly in a tax-advantaged manner so that there is no confusion about what you want. Preparing your estate now ensures that your legacy is carried on in the way you want it to be.

Every estate plan needs to have:

  • A Will or Trust – A will is a legal document that expresses your last wishes for distribution of your property or other assets. A trust is a fiduciary agreement that allows a third party, called the trustee, to hold assets on behalf of beneficiaries. Trusts often are used to limit estate taxes and legal challenges. It is imperative that these documents are properly drafted according to state laws and are consistent with the way you have bequeathed assets outside of the will.
  • Durable Power of Attorney – This allows a person you assign, referred to as an agent, to act on your behalf when you are no longer able to do so. This document can give your agent the power to enter financial transactions, transact real estate and make legal decision on your behalf. Without a power of attorney, a court may be left to decide what happens with your assets.
  • Beneficiary Designations – A beneficiary designation is a description of the person or persons you want to receive an asset upon your death. Certain assets do not have to be named in your will to be passed to the beneficiary, however if you do include them in your will you need to ensure that the beneficiaries match in your will and with the asset.
  • Healthcare Power of Attorney – You may be able to guess, but a healthcare power of attorney designates another individual to make important healthcare decision on your behalf in the event of incapacity. Ensure you pick someone you trust that shares your views and would recommend a course of action you would agree with.
  • Guardianship Designations – Guardianship designations are not incorporated in all wills and trusts, but they are imperative if you are considering having kids or do have minor children. Picking a guardian for your children is a huge decision with many personal factors. Try to ensure that the person or persons you choose share your views, are financially sound, respect your wishes for your children and are genuinely willing to raise you children with care. Without these designations a court could rule your children to live with a family member you would not have wanted or even mandate your child a ward of the state.

The cost of creating an estate plan can vary widely depending on how complex your estate is and who or what you use to create your plan (e.g., an attorney or an online platform).  It’s easy to convince ourselves that we don’t need an estate plan when really, we would all be better off if we had a plan for our future and the future of our loved ones. Life is completely unpredictable, and you do not need to be elderly or wealthy to create an estate plan, you can and should start thinking about creating a plan sooner rather than later.

 Opinions expressed in this blog post are those of the author and not necessarily those of Raymond James. All opinions are as of this date and are subject to change without notice. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.

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