Natalia Vander Laan
Estate planning is a vital aspect of financial planning that is essential to ensure that one’s assets are protected, loved ones taken care of, and the decedent’s wishes are followed. But it is a complex process that raises many questions for fiduciaries and family members.
What is estate planning? Estate planning is the process of organizing and managing one’s assets during the person’s lifetime and ensuring efficient and proper distribution of assets after the person’s passing. It is a process that involves making decisions about fiduciaries, thus those in charge of one’s affairs during incapacity and after death, and beneficiaries, thus those that inherit the estate. It involves multiple legal and financial documents, such as wills, trusts, and powers of attorney.
Is an estate plan needed? Yes, every person should have an estate plan, regardless of their age or the size of their estate. An estate plan is not only for the wealthy people as it not only provides a person with control over their financial and healthcare decisions during their incapacity, but also ensures that one’s wishes are carried out and reduces the potential for disputes and legal conflicts.
What are the core documents in the estate plan? Essential documents necessary for the effective estate planning include: will – a document specifying how one’s assets should be distributed upon death and allowing a nomination of guardian for minor children; trust – a document creating a legal entity that holds and manages ones’ assets during lifetime, incapacity, and after death, by providing specific instructions; power of attorney for financial decisions — a document granting another person, called an agent or attorney-in-fact, authority to make financial and legal decisions on behalf of the incapacitated person; health power of attorney - a document granting another person, again called an agent or attorney-in-fact, authority to make health decisions on behalf of the incapacitated person; and finally, a living will — a document that outlines end-of-life decisions.
What happens if there is no estate plan? When there is no direction from the incapacitated person, a court order may be needed to authorize a family member to make health and financial decisions. Furthermore, when there is no direction regarding the distribution of assets after death, the assets will be distributed according to the state law, which may not align with one’s wishes.
When is estate plan needed? The sooner, the better. Unforeseen circumstances can arise at anytime and it is best to have an estate plan in place, in case it cannot be done in emergency situation.
Can estate plan be changed? In most situations, absolutely. In fact, it is recommended to review one’s estate plan periodically and after significant life events like death, marriage, divorce, birth of children, or change in financial situation.
Is do-it-yourself estate plan a good idea? It is certainly possible to create some basic estate planning using online and other available resources. However, working with a qualified professional can help ensure that the estate plan is legally binding and one’s wishes are correctly reflected in the documents.
Estate planning is essential but can be difficult to manage and answering these most common questions can begin to prepare one to navigate the process.
Natalia Vander Laan is a Minden attorney.
