by John S. Ferraro, Senior Wealth Advisor
October 17, 2024
October is Estate Planning Awareness month. This is a great time to take inventory of your financial assets and ensure you have a plan in place for those assets beyond your life. This is a great reminder to personally take inventory of your financial wellness. Over 56% of Americans do not have an updated estate plan in place according to the National Association of Estate Planners and Councils. Most people think estate plans are just for the elderly or the wealthy. This is a very common misconception that everyone has about estate planning.
An estate plan consists of several legal documents that detail what happens to your assets when you die or become incapacitated. Accidents can happen at any age and having an estate plan is like a game plan that is developed to take care of loved ones, specifying asset divisions and who has the responsibilities to make sure the plan is administered properly based upon your (the grantor’s) desires.
What should the estate plan include:
Will
Trust
Power of Attorney (POA)
Healthcare Directive
Beneficiary Designation
Designated Guardian for Minor Children
1) Will: A legal document that contains your direct wishes on how assets will be distributed. If you die without a will, then decisions could be made by a judge or the state. This could cause family issues and be very expensive and emotionally draining for everyone involved.
2) Trust: Like a will, trusts are legal documents that direct the management of the assets, the beneficiaries and how the assets are to be distributed. The trust names a third party (called a trustee) who holds the assets on behalf of the named beneficiaries. The trustee has the financial responsibility to manage the assets and fulfill the instructions set forth by the grantor. Trusts can be very helpful to avoid probate, provide privacy, and possible estate taxes. For more information on trusts, see Landon Buzzerd’s earlier whiter paper dated June 2024 entitled, “The Role of Trusts in Achieving your Legacy Goals”: https://www.gsaminc.com/post/the-role-of-trusts-in-achieving-your-legacy-goals
3) Power of Attorney (POA): This legal document designates an individual who will make financial and legal decisions on your behalf if you become incapable of handling things for yourself.
4) Healthcare Directive: Often called a “living will”, this is a written document that informs your doctors, health care providers and family members who will speak for you about medical decisions that should be made on your behalf if you cannot make these decisions yourself. It can include your wishes and instructions for care at the end of life.
5) Beneficiary Designation: This is a person(s) who you want to inherit your assets. Most designations will include the name(s), relationship to you, address, email, date of birth, social security number, etc. This is very important and so legal representation will guide you to develop this step properly.
6) Designated Guardian for Minor Children: If beneficiaries are minor children, appointing a guardian who will make sure that the children are provided for financially until their age of majority (age 18 in PA) is especially important for them. There are several different approaches that an attorney can present for your children’s best interest. Which approach is best for you will depend on your particular circumstances.
Estate planning helps to ensure that your wishes will be adhered to, while minimizing potential disputes among beneficiaries, avoiding probate, and minimizing taxes on your estate. Estate planning is important for anyone (young or old) who wants to protect their assets and loved ones.
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