What are common estate planning objectives? How do you set estate planning goals?
It’s never too early or too late, and you are never too young or old to start making estate plans.
And at the very least, you should create a will. This is of the highest importance if you have children, a spouse, or dependents who depend on you for their security.
Do you have a business or are you an entrepreneur? You need to safeguard your clients as well within your will and estate plans.
Wills and estate planning are things we all know are important, yet we commonly put them off. Making a plan for your family after you are no longer around isn’t a particularly fun thing to think about, much less put into place.
Although this kind of planning can be a tedious process, it is critical to work through it. You have to secure your wealth and property for your beneficiaries and avoid any conflicts by choosing an executor who has control over your decisions.
Let’s get you started and your estate protected with the main estate planning goals and objectives you need to meet.
What is Estate Planning and What are its Objectives?
Estate planning is only one part of getting your finances in order. Setting goals, making a budget, and putting money aside for emergencies is also important.
Learning better spending habits is the first step in planning for the future. First, think about your goals and where you want to be. Then, make a plan to get there.
Estate planning is not simply making a will. Having a will is a part of the process of estate planning, but the process involves much more. An estate plan is a comprehensive plan that includes documents important for your lifetime and documents that aren’t in effect until your death.
The documents produced during your planning will speak for you. One of your estate planning goals is to spell out who has the power to make healthcare and financial decisions on your behalf during your life and who will receive your assets at death. Making this decision is especially important after a sudden or unexpected death, such as from a drunk driving car accident.
What Are the Four Important Estate Planning Factors?
Your estate plan should include the following documents:
- A last will and testament
- A durable power of attorney
- A healthcare power of attorney
- An advance directive
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Why Make an Estate Plan?
There are different reasons why you need a will. Additionally, there are seven main reasons you might need estate planning:
- To select and empower people you trust to handle things for you if you become unable to handle things yourself
- To provide for your dependents and beneficiaries
- To appoint a guardian for your minor children
- To minimize confusion and conflict after your death
- To reduce or avoid taxes
- To avoid probate
- To ensure your obligations are met and expenses paid
Your last will and testament will explain where you want your assets to go upon your death. It will also relay who you would like to serve as guardian of your minor children as well as who you have chosen to serve as your executor.
Your executor is in charge of distributing your assets to the right people or charities according to your wishes.
Why Do You Need to Name an Executor?
Naming an executor is an important part of making a will. If there is no will or the will doesn’t name a living executor, a judge can appoint an individual to act as a fiduciary and handle the estate.
You can select an individual such as your spouse, another family member, a friend, or a trusted professional as executor. You may also choose a corporate fiduciary, such as a bank, brokerage, or trust company.
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Personal Representative vs. An Executor
There is no difference between a personal representative and an executor when referring to wills and estates. Either one will be named in the will and oversee the disposition of property according to your wishes.
Personal representative duties include gathering and valuing all probated property, contacting beneficiaries, giving adequate public notice to creditors, and paying all valid claims.
Additionally, before the final disbursement of the estate, the executor must file final tax returns and pay any federal and state income and estate taxes. While estate assets are under the executor’s control, they are legally responsible for any losses and can be held personally liable by the court.
While creating plans to leave your possessions to family and friends, consider talking with a few trustworthy people close to you about your plans.
By discussing your plans with family and close friends, you can help alleviate any issues or disagreements that may come up after you pass.
Regularly Review Your Will
You should also be sure you review your plan regularly. Setting an annual day to review your plans is a good idea. In addition, if you have any significant life changes, such as getting married, divorced, or having a child, you need to update your planning documents as soon as possible.
It is imperative to have a chain of legal guardianship in place for your child if something were to happen to both parents.
If you are single, it may be sufficient for you to use simple online resources to create an adequate will. However, you should consult an estate attorney when your life becomes more complex.
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What is a Durable Power of Attorney?
A durable power of attorney names an agent (someone you choose) to make financial decisions for you if you become incapacitated, which may include paying bills and writing checks on your behalf.
A durable power of attorney can become effective immediately or upon your incapacity.
What is a Health Care Power of Attorney?
This estate planning document appoints an agent (again, someone you choose) to make medical decisions for you if you become incapacitated. The document also contains an advance directive, which details your decisions on life-prolonging treatment.
What is an Advance Directive?
An advance directive is written instructions about future medical care if you become unable to make decisions (for example, if you are unconscious or too ill to communicate).
States regulate the use of advance directives differently. A living will is a type of advance directive that takes effect when the patient is terminally ill.
Advance directives can be revised and updated as often as needed. Patients and caregivers should discuss these decisions and any changes to them. Always keep your health care team informed.
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Health Care Proxy
The person designated to make medical decisions on another person’s behalf is a healthcare proxy. (The terms healthcare proxy, healthcare agent, and healthcare surrogate are used interchangeably).
Designated responsibilities are called durable because they remain in effect even when the person cannot make decisions.
The designated decision-maker is usually a close friend or a family member. Therefore, a designated person should understand the patient’s treatment choices and values and support their decisions. Having a healthcare proxy is extremely important.
You should be sure a written document identifying your designated healthcare representative is part of your medical record.
Some states have forms that combine the intent of the durable power of attorney (naming an advocate) and the intent of the living will (to state choices for treatment at the end of life). These combination forms may be more effective than either of the two used individually.
What is Probate and How Do I Avoid It?
Most states allow a certain amount of property to avoid probate or go through a simplified probate procedure. In addition, property that passes on outside of your will (through joint tenancy or a living trust) is not subject to probate.
Most often, the executor named in the will handles the probate procedure. However, if there isn’t a will or the will doesn’t name a living executor, the probate court will name an administrator to handle the process.
Often, the job goes to the closest capable relative or the person who inherits the bulk of the deceased person’s assets.
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If no formal probate process is needed, the court won’t appoint an estate administrator. In that case, a close relative or friend serves as an informal estate representative. Several people can share the responsibilities of paying debts, filing a final income tax return, and distributing property to those designated.
In most states, without a will, your estate will go into the process known as probate. In probate, the state will determine the distribution of your assets.
Probate costs money and time. So, it only makes sense if your estate will have complicated problems, such as many debts that can’t easily be paid from the property you leave.
If your situation is straightforward, your estate plan will be relatively simple as well. However, if your situation is complex or you own a business, you may want to consider speaking to an attorney about other options like a revocable trust.
If you hold your property in a trust, your survivors won’t have to go through probate court at the time of your death. Avoiding probate will simplify things and save time and money.
What are the Main Goals of Estate Planning?
In planning for the future, your main goal is deciding how you want your assets disbursed after your passing. You also need a plan for making financial and medical decisions on your behalf if you become incapacitated.
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#1. Plan for Your Dependents
You need a plan to protect your children’s property and make the filing of beneficiary forms as straightforward as possible. In planning for your dependents, you will want to examine your family’s needs and look into life insurance options.
Understand the tax liabilities in your state and what you can do now to minimize expenses.
#2. Prepare Your Last Wishes
You will want to ensure your financial obligations and final arrangements are taken care of. In addition, you may wish to specify your last wishes — whether you want a traditional funeral or a memorial service, and if you prefer cremation.
State whether you have any funeral arrangements and where you made these arrangements.
If you own a business, you’ll want to be sure you have a succession plan in place for your business. A succession plan will ensure your business can continue to operate as smoothly as possible.
#3. Organize Your Documents
You will want to arrange to keep all your important documents together and let your personal representative or other trusted friend or family member know where to locate these documents.
Important documents to include are:
- Certificates for stocks, bonds, and annuities
- Funeral prepayment plans and any final arrangements instructions you have made
- Information on bank accounts, mutual funds, and safe deposit boxes
- Information on retirement plans, 401(k) accounts, or IRAs
- Information on debts: credit cards, mortgages and loans, utilities, and unpaid taxes
- Insurance policies
- Last will and testament
- Real estate deeds
- Trusts you have established
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Making an estate plan involves taking stock of your life and making decisions about what happens to your loved ones and your finances when you are no longer around. It is also an excellent time to evaluate your personal and professional goals.
Consider changes in areas of your life where you are not satisfied. For example, you might want to make a plan to go back to school, buy a home, change careers, travel, or just set financial goals to help you get where you want to be.
Create Your Estate Plan
Not everyone needs a complex estate plan. If you believe you may need a more plan, speak to your accountant or attorney. If your situation is more straightforward, you may create a simple will and health care power of attorney with the help of an online legal platform.
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Want to focus on your finances? Great, step one is creating your budget. With the Simple Budget Spreadsheet, you’ll be able to track your expenses and savings It’s easy to use and compatible with Google Docs and Microsoft Excel.
If you are unsure where to start, you may want to speak to a local business librarian for guidance on personal financial planning publications and to learn about community resources.Haven't started estate planning yet? Do you have a will? Here's how to set estate planning goals and objectives to secure your legacy. #Wealth #PersonalFinance #FinancialLiteracy #EstatePlanning #MakeAWill
What estate planning goals and objectives have you set?
More About Guest Contributor
Teresa Johnson writes and researches for the legal advice site, FreeAdvice.com. She is passionate about educating consumers in personal financial planning.
Last Updated on December 28, 2022