What you don’t know about estate planning can hurt your loved ones.

It would be best if you experienced someone dying to know about passing on your assets most efficiently.

Many estate planners make it a point to educate prospective clients about the fundamentals of estate planning. This is true whether or not the prospective clients already have an estate plan because frequently, even people who already have an estate plan have yet to learn what it says or means.

Once you understand one part, you can move on to the next and the next until everything becomes crystal clear. Estate planning isn’t just about signing legal documents. It’s about making informed decisions that create legal documents that put your wishes, goals, and final instructions in writing. As a result, creating peace of mind for you and your loved ones is the one essential thing that estate planning is making peace of mind.

7 Fundamentals of Estate Planning

The key to understanding your estate plan is to understand the answers to the following seven questions:

1. What is the purpose of an estate plan?

Estate planning is not just about planning for what happens to your property after you die. It is also about planning what happens to you and your property if you become mentally incapacitated. Many times mental disability planning is either not discussed or only touched upon during the estate planning process.

This is a mistake since statistics show that while people live longer, they are not necessarily healthier. Aside from this, accidents can happen at any time, rendering you incapable of making personal and financial decisions. Therefore, your estate plan should address both planning for incapacity and planning for death.

2. Which taxes affect an estate?

Many types of taxes can affect your estate: death taxes (inheritance taxes), gift taxes, capital gains taxes, stamp duty, and income taxes. Understanding if and how these taxes will affect your estate and, thus, the inheritance your beneficiaries will receive is an essential part of estate planning.

3. How is your property titled?

This is a simple concept – how your property is titled will dictate who will inherit it after you die – yet day in and day out, people need to learn how all of their property is titled. Is it in joint names with the right of survivorship, tenants by the entirety, tenants in common, or in a living trust? Or as the primary and secondary beneficiaries for certain types of assets?

Understanding who owns what is the key to good estate planning since who owns it now leads to who will inherit it after death. For example, suppose your Will leaves everything equally to your brother and sister; however, all of your property is in joint names with the right of survivorship with your sister. In that case, all of your estates will go to your sister after you die, and absolutely nothing will go to your brother.

Then what was the purpose of your will?
4. What are the options for paying your beneficiaries their inheritance?

Once you have put a plan in place to care for yourself and your property, if you become mentally incapacitated, you can focus on who will inherit your property and how they will inherit it after you die.

You can leave your estate to your beneficiaries – outright in one lump sum, in phases or stages, in lifetime discretionary trusts, and everything in between. Understanding the difference between providing for minor and adult beneficiaries is also essential. Aside from this, you can attach strings to your property and limit how your property can be used.

5. What are the essential estate planning documents?

The building blocks of a good estate plan include a last will, Advance Health Care Directive, and Power of Attorney. Aside from these documents, as mentioned above, some people may benefit from having a Living Trust as part of their estate plan.

6. How often should you review your estate plan?

Once you have your estate plan, you cannot simply stick it in a drawer and forget about it. Day in and day out, things will affect your estate plan – you may get married or divorced, have children or grandchildren, lose a loved one, move to a new country, or buy or sell a business.

Aside from this, estate and tax laws are constantly changing. All of these things, and many others, will affect your estate plan, so you need to review your plan regularly to ensure that it still meets your estate planning goals.

7. What is a living trust, and do you need one?

A living trust is a legal document that covers three phases of your life – what happens to you and your property while you’re alive and well, if you become mentally incapacitated, and after you die.

One of the main reasons people use a living trust as part of their estate plan is to avoid probate, but it is also a powerful tool to keep your estate plan a private family matter. And because estate planning is not one size fits all, many factors must be considered before deciding if a living trust is right for you.

Estate Planning can be simple, BUT it certainly needs consideration.

Feel free to ask questions, and I would be happy to help.