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Estate Planning

Estate Planners | Tuesday, September 21st, 2010

What is Estate Planning?

Estate planning involves making decisions about what will happen to your property and assets after you die. Planning ahead of time exactly how you want your assets distributed and to whom will make your passing easier on your family and friends since your final wishes will be clearly defined through documents such as a will, a power of attorney, a medical power of attorney, and funeral arrangement requests. Estate planning sets your wishes in writing so that when you pass away or become unable to care for yourself, your family can follow your wishes to the letter with no guess work or agonizing during an already traumatic time.

Estate planning is a service provided by professionals who usually have backgrounds in accounting, law, and/or finance. Their broad knowledge of the way these areas will affect your estate assists you in minimizing the cost and hassle to your heirs of taking care of your estate after your death.

What happens if you die without any estate planning?

Dying intestate means that a person has died without leaving a will instructing his heirs about how to dispose of his assets and property. Even if you feel that your estate will be relatively small and insignificant, it is still a wise decision to perform some basic parts of estate planning since those who die intestate leave their estates open to court challenges from anyone and everyone. The courts may not decide to dispose of your property in the manner that you would want, so making decisions about estate planning can prevent adverse consequences from occurring after your death. To be certain that your family or other heirs will benefit from any assets or property that you leave behind, you should consider some form of estate planning.

Probate is the process of a person.s estate going through the courts to be disposed of. Estate planning takes into account that your estate will have to go through probate and takes steps to ensure that probate will go as smoothly as possible. Estate planning can prevent common problems involved in probate by making provisions in your will and other estate planning documents. If you die without a will, there are many ways that your estate can be challenged by others. Estate planning involves making certain that your estate will go through probate without any problems for the executor who is the person you designate to finalize your estate and distribute your assets and property.

What are the major elements of estate planning?

Estate planning involves several elements:

  • Life Insurance
  • A Will
  • Power of Attorney
  • Medical Power of Attorney
  • Funeral Arrangements

Each of these elements is an important part of your estate planning. Estate planning is more than merely listing who will receive which property after you die. Estate planning also involves determining who you would want to make decisions about your business and life in the event that you are incapacitated or otherwise cannot make the decisions for yourself. This is where the power of attorney and medical power of attorney play a role in estate planning.

The first element of estate planning is life insurance. Life insurance ensures that your family has enough money to pay for your funeral arrangements, and likely there will be some money left over for them to have in addition. Funerals can cost thousands of dollars, burdening your family if you do not plan in advance for funds to be available to pay for your funeral. Estate planning will help you make decisions regarding life insurance that will pay a sufficient amount of money on your death to have the funeral arrangements that you want and also leave some money for your heirs.

The main element that most people associate with estate planning is a will. A will is a widely recognized document that explains exactly what assets and property you have and who you want to have those assets and property after you die. Wills can also specify who you want to become guardians of your children if you die before they reach the age of majority. Wills can specify primary and secondary beneficiaries of your estate. A primary beneficiary is the person you want to inherit your estate. If for some reason the person named as the primary beneficiary dies before you do, naming a secondary beneficiary will allow your estate to pass to the secondary beneficiary without having to draft a new will. Estate planning ensures your will is drafted in a sound manner following all the legal requirements so it will be upheld in court during probate and will be free from any challenges.

Another element of estate planning is a power of attorney. This is a document that designates another person to act in your place in all decisions for you, whether the decisions are about banking, contracts, buying and selling property, or investing. This can be a very tenuous document because whoever you designate must have your utmost trust. This person will be able to buy vehicles, buy real estate, and borrow money that you will be legally liable for. But the advantage of a power of attorney is that this person will be able to make all decisions for you if you are not able to do so yourself because of incapacity. If you do not have a power of attorney, your assets could become tied up because no other person than you can access your bank accounts. In this scenario, if you were incapacitated, your family could not use money that you have to pay for your medical expenses, creating a very tenuous situation.

A fourth element of estate planning is a medical power of attorney, which grants another person the right to make medical decisions for you in the event you are incapacitated. For example, if you are in a car wreck and in a coma, the person designated in the medical power of attorney can decide how long you will remain on life support. An alternative to the medical power of attorney in estate planning is a living will. In a living will, you specify exactly what your wishes are in certain medical circumstances, such as if and when you want to remain on life support. The living will does not designate another person to make these decisions but explains your particular wishes in certain medical circumstances, so the living will can then be followed by your healthcare providers if such situations ever arise.

Another important part of estate planning is determining what funeral arrangements that you want. Writing down your wishes regarding your funeral can be an important area of estate planning because it relieves your family from having to make these decisions in the stressful aftermath of your passing. Without leaving a written guide for your loved ones to follow, the funeral arrangement process can potentially be very arduous for them during a time when they are dealing with your death. To ensure your family has a clear understanding of your wishes regarding your funeral, include this in your estate planning. Another option is to prepay for your funeral and make the decisions about your funeral while you are still alive. You can go to a funeral home and preplan and prepay for every part of your funeral, from the casket to the gravesite. If you can afford to do this part of estate planning while you are still living, prepaying your funeral is a great way to alleviate some of the stress on your family after you die.

These elements combined together constitute the bulk of estate planning. In your estate planning, drawing up a will, power of attorney, and medical power of attorney are the legal parts which will ensure that your wishes are carried out regarding your medical care and disposal of your property after your death. Life insurance is an estate planning element that will pay for your funeral and possibly leave some money over for your heirs. Writing out your funeral arrangements or scheduling the arrangements with a funeral home in advance will relieve pressure on your grieving family after your death.

As you can see, estate planning involves much more than deciding who to give your property and money to after you pass away. Many decisions about your medical care, funeral, and business must be taken into consideration in estate planning. Estate planning includes making decisions about all areas that will be affected by your death or incapacity. Estate planning guarantees that your wishes will be carried out after your death and that what you want to happen will indeed occur.

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