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Control and Access: The Case for Estate Planning

Control and Access: The Case for Estate Planning

Let’s be frank—estate planning and discussing the prospect of dying aren’t any fun. After all, who wants to invest time and money preparing for a scenario in which they are dead or incapacitated? These are tasks borne from necessity and often ignored for the reasons above.

But two powerful words make the case for exactly why everyone should create a version of their estate plan anyway: control and access.

Let’s talk about access. Your estate plan can ensure that, for example, in the event of an untimely passing your children have access to the home they were raised in—rather than having to sell it because they cannot afford its maintenance or worse, just to pay the 40% federal estate tax. Access can also mean that your heirs can enjoy the opportunities and experiences that you hoped for them and worked so hard to provide.

How about control? Estate planning lets you take control over the “who, what, and when” of estate planning – or where your assets go once you’ve passed on. Whether you want your assets to go to your children rather than your ex-spouse, or to that pet charity you were too embarrassed to give more that $100 to during your lifetime, an estate plan allows you to fulfill your intentions.

Consider if you had a machine that made money in your basement. Would you insure it? Most certainly. Well, you’ve spent your lifetime creating your wealth. You are that machine. Is it worth the small amount of time and money – the insurance premium, if you will – to protect your precious assets and make sure they’re provisioned in the way you want? We think so.

Five key documents form the core of any estate plan. By creating them now, when you are of sound mind and body, you will minimize the burden on your loved ones and heirs when they’re dealing with your death or incapacity. 

Will

A will is a legal document that is essentially a set of instructions—for how you want your assets to be distributed and who you want to care for your children. The executor you name will to carry out the instructions in your will, so it’s important to appoint someone who you not only trust, but who also has a good handle on financial and legal matters. However, today wills are typically used to avoid probate costs, protect privacy, and direct assets not placed in trust into the appropriate trust.

Living or Revocable Trust

A living trust—also known as a revocable trust—specifies how assets held within the trust are to be managed and how principle and income are to be distributed. As the name suggests, these trusts are created while you are alive. They are “revocable” because they can be revoked or amended. Naming yourself as trustee(s) ensures that you will control the assets during your lifetime and that your successor trustee will handle the funds after you die.

Most importantly, as mentioned above, living trusts spare your family the hassle of the expensive of the time-consuming probate process. And unlike the case with the probate process, the details of any legal battles over your property may be kept private.

Irrevocable trusts are a different type of trust and an incredible estate planning tool alongside your will. By housing your assets inside trusts, they can immediately be available to your spouse and heirs. After your death, those you care about will not have to struggle with a bank to pay off any immediate bills or medical expenses. Most importantly, if properly executed, asset placed in these trusts – as well as their appreciation – may avoid estate taxes altogether.

Durable Power of Attorney

A durable power of attorney authorizes someone to act as your agent in financial and legal matters in the event that you become incapacitated. This party may be responsible for everything from signing an income tax return to managing bank accounts to trading stocks and handling real estate. Creating a durable power of attorney document can be intimidating for many people because it involves giving another person a great deal of power over your life. However, it’s critical that a responsible party have the ability to manage your financial affairs only if you become incapacitated. A durable power of attorney helps to assure that you will be taken care of when you are unable to take care of yourself.

Healthcare Proxy and Living Will

These last two documents are probably the least widely understood. A healthcare proxy gives an individual the legal authority to make medical decisions for you when you no longer can. It also gives that person access to your medical records. A living will gives instructions for doctors when questions arise about whether to artificially prolong your life. The healthcare proxy and living will give you control over critical decisions when you are unable to express your wishes.

Why Plan?

Many people are motivated to draw up their estate plans out of concern for their loved ones—and rightly so. When you fail to draft these key documents, you can leave those you care about with an ugly mess to deal with while they’re likely to still be coping with the loss of a loved one.

By way of example, let’s say that you and your spouse pass without a valid will. In that case, the distribution of your assets will be determined by the state, and a court will appoint a guardian for your children. The rest of your family may battle over your wealth; likely racking up legal fees and destroying relationships in the process. 

Estate planning can be a daunting prospect. But your financial advisor can walk you through the entire process and make it as simple as possible. Bear in mind that the five documents we’ve discussed in this article are just the basics. Every estate plan is different, and yours may require additional steps. The bottom line: Taking care of your estate planning now is not only a means of ensuring that your wishes are carried out, but also an act of thoughtfulness toward your heirs and loved ones.

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