What Does Estate Planning Mean? What You Should Know

When you're just getting started with retirement planning and estate planning, it can be tough to know where to begin. Here, we'll go over the basics of estate planning.

Do You Have an Estate?

Most likely, yes. If you own furniture, a car, a home, a checking account, and/or other personal possessions, you have an estate. 

What Is Estate Planning?

Estate planning involves deciding who will receive your belongings if you pass away. Estate planning may also include choosing a guardian for your children, providing loved ones with financial support while minimizing taxes, choosing who will receive your business, and more. 

Terms to Know

As you go through the process of estate planning, you'll want to understand the following terms:

• Will
  A legal document that specifies how you'd like your assets distributed if you pass away. It requires a probate hearing (more on that shortly).

• Living trust
  A legal document that specifies how you'd like your assets distributed after death. It does not require a probate hearing.

• Beneficiary
  A person who will receive some or all of your assets after you pass away.

• Power of attorney
  Person designated to make financial or health care decisions for you if you are rendered unable to do so.

• Executor
  Person you choose to manage the distribution of your financial assets after your death.

What Is Probate?

The specifics of the law vary by state, but if you pass away with a will, the court will hold a probate hearing to ensure the assets of the estate are handled as directed by your will. There are legal costs to go through this process.

If you pass away without an estate plan, the state’s laws will instead determine how your assets are distributed to surviving relatives, which may not be how you want them distributed . Similarly, if you have minor children and both you and your spouse pass away at the same time, the court will choose a guardian for them. 

Estate planning – which may include choosing a revocable living trust to avoid probate and a will to establish guardianship – is necessary to ensure your wishes are honored upon your death.

Keeping Up With Life's Changes

If you already have an estate plan, it's key to revisit your plan from time to time. Marriage, divorce, expanding your family, changing business situations and more can all affect your estate planning process and should be discussed with your financial planner on a regular basis.

Ready to Start Your Estate Planning Process?

Estate planning can feel overwhelming — I can help. Schedule a 15-minute call with me so we can get acquainted and talk about your financial situation, including how estate planning impacts your financial plans.