What is Estate Planning and Why is it So Important?

Schedule your complimentary appointment with us here.
 
What is Estate Planning and Why is it So Important?
 
There are some challenging conversations in life that affect all of us, regardless of our position in life. Planning your future and what you want to occur in the event of your incapacitation or passing is one of those talks.  Too many people think youth or time allows them to make decisions later. Some just do not want to face the difficult discussions with family members. Knowing what is an estate plan (and what is not) and how it can provide a sense of relief and comfort may help ease those tough conversations and decisions. Having one also provides whoever is handling your estate and navigating the probate process a defined road map of your wishes.  Planning estate details solves a myriad of potential issues, can reduce stress, and has potentially financial-stabilizing effects if done correctly.
 
One component of estate planning covers the individual’s assets, such as a house, bank accounts, retirement accounts, like a 401(k), and other investments. The individual will direct how and to whom they want these assets to pass. Many times this is to loved ones, while others may want to make certain that issues they care deeply about receive a portion of an estate as a legacy to projects, organizations, or causes.  There are many other facets to an estate plan as well that need to be reviewed and put in place for those you love or things that are important to you.  
 
Multigenerational family opening a gift together
Make Decisions Early to Best Protect Retirement and Loved Ones
 
Making decisions about investing, what happens to minor children, and your health care directives are all part of estate planning.  It involves some time and decisions that are critical to the well being of you, your family, and things you care about.  It assures that your choices are honored, loved ones are protected, and your legal matters and finances are in order. Establishing an estate plan can address the choices for retirement account and 401(k) beneficiaries, health care directives, and possibly establishing a trust that may benefit family members. It also can assist with tax planning and avoiding probate.
 
A Good Estate Plan Uses Solid Planning Strategies
 
Spending time with a qualified estate planning attorney can be one of the most critical conversations you will ever have, as well as one of the most stress-relieving.  The time spent estate planning, whether it be through a will or a trust, are all steps to a more solid future. A certified financial planner or financial advisor can examine the “big picture” of your current and potential future financial life.  They can provide insight and advice on actions you might want to take so that your assets pass according to your wishes and as efficiently as possible.
 
A thoughtful CFP or financial advisor takes the time to get to know you and establish a solid working relationship. They know your goals, plans, hopes, and for whom you care about the most. Based on that, as well as on your age and risk tolerance, they advise how to invest and implement what is needed.  Not only does that advisor work with you on your investments, but they make sure your estate planning needs are being addressed. While they cannot write a will or a trust, they can put you in touch with an estate planning attorney who can do just that. Estate planning involves making certain legal documents such as wills, living trusts and life insurance policies are current and properly executed. It also involves powers of attorney, titling, and beneficiary designations.  Over time, just like your doctor, dentist, attorney, and accountant, you advisor becomes a trusted part of your “team” to provide professional wisdom in your decision making processes. 
 
Beneficiary Designations, Health Care, Estate Taxes Are All Important
 
Planning strategies need to go beyond investment selection. It includes beneficiary designations, titling, and probate avoidance. Depending on the size of your estate, it might include estate tax avoidance strategies. It might include using life insurance policies to fund certain parts of the plan.  Health care decisions are especially important due to the high cost of long-term care, catastrophic illness, and other issues. Therefore, long-term care insurance might be included. A solid estate plan should include a medical power of attorney, living will, advanced directives (how you want health care decisions handled if you are unable), and a medical surrogacy. That way your family or loved one knows exactly what your choices are, and have the legal authority to proceed with those choices in the event they are faced with difficult decisions. Putting these documents in place can save critical time and strain for whom you have asked to be responsible.  And one thing is very true, it is never “too soon” to have those documents in place. Providing protection and direction is priceless when your family has to deal with already difficult times when you are gone. 
 
Get Legal Documents in Order
 
Among the important documents to have in place are a will, any medical paperwork that needs to be decided, and power of attorney documents. Many people are misinformed about the purpose and use of a POA. There are several types, including medical and financial powers of attorney. Depending on the state you reside in, POAs can be limited in scope and time, or can be permanent. Speaking with an estate attorney can offer clarification on how to protect your interests while providing the means to act on your behalf for your designee or a trustee.  They can also provide information about the probate process where you live. That information may assist in estate plan strategies providing a more solid future for your estate and beneficiaries. 
 
Many people tend to miss the importance of banking and financial institution designations during the estate planning process.  Beneficiary designations need to be done for bank accounts, life insurance policies, investment accounts, and other assets, such as vehicles.  Keeping those designations updated is very important so the probate court does not have to be involved deciding who gets what.  Keeping a checklist for estate planning that you and your financial advisor, estate attorney, and accountant review periodically makes certain everything is in order. 
 
Many People Overlook Minor Children or Family Members Requiring Care – Don’t!
 
A commonly missed step in estate planning many people sadly make is the custody and care of minor children, family members requiring special care, or even pets. Your estate planning strategies need to include not only custody, but support and care information for them. State laws vary regarding appointment of guardians and custodians, so consulting an estate plan attorney is a good idea. They can work with your financial planner to make sure documents are in order, and that your wishes can be carried out for their care. Solid financial planning is especially important when you have children or loved ones that depend on you. Make certain to mention to your estate planner those concerns so a solid estate plan can be crafted that meets those possible future needs. The last thing anyone wants is for the probate court or other entities to make decisions that are not your wishes or in the best interest of those you love. 
 
How Expensive is An Estate Plan?
 
Estate plan costs can range from a few thousand dollars to several thousand dollars depending on the size and complexity of your estate and on the attorney used. Some estate planning attorneys charge by the hour while others charge a flat fee. It’s a good idea to inquire before proceeding with one. Most financial advisors include their estate planning advice in their overall advisory fee. Again, the nuts and bolts of an estate plan are designed, written, and taken care of by the attorney, while the advisor can make sure that you have in place what is needed. They can also be a sounding board for what other folks might typically do with their estate planning decisions as well as provide references for estate planning attorneys. 
 
Are you approaching retirement and wondering how long will my retirement savings last? Learn more here.
 
Schedule your complimentary appointment with us here.
 
One Bridge Wealth Management does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation.