Estate Planning Basics

Jodee Redmond
legal agreements

Estate planning is an essential task for seniors, regardless of the level of wealth or assets. By properly planning how to distribute your wealth after you pass on, you can eliminate stress and complications both for your own peace of mind and for the well-being of your loved ones.

Finances for the Future

Discussing inheritances and post-death financial arrangements is not the most pleasant topic, and many individuals, particularly those with straightforward accounts and few heirs, question why they need to plan their estate at all. The truth is, even the simplest estates can be tied up in probate court for up to two years and may be disputed by any number of individuals, including imposters or creditors. Organized plans help provide for loved ones and ensure that money and property is distributed at the will of the grantor (the individual distributing it), rather than being arbitrarily apportioned.

If an individual dies without any instructions for their property and finances, it is called dying "intestate" and their assets automatically revert to the state, which may leave heirs completely devoid of connection to the person's belongings. Proper planning prevents that.

Types of Estate Planning

Last Will and Testament

There are a few different types of planning devices dealing with estate matters. Which plan to choose depends on the individual's preferences, the complexity of the estate, and the items to be addressed. For more information, as well as a discussion of how your own situation fits with these different options, consult an experienced estate attorney.

Wills

Wills are the most common and simplest type of after-life documents and have been used for centuries. A will is a record of an individual's plan to distribute money and property after his death, and many wills are only that; complex arrangements are not necessary. Wills, however, can be contested, and litigation may drag out for years. Furthermore, wills do not make provisions for dealing with finances if the grantor is still living or if an inheritance is to take place over a period of time. If, however, your estate is rather simple and any heirs are able to cooperate well, a will is often sufficient.

Annual gifts, while the senior is still alive, of up to $13,000 (as of 2009) are not taxed as inheritances, and sharing the wealth in this way also gives seniors the joy of seeing it used appropriately and appreciated. Decreasing an estate also lowers the senior's tax burden, making his financial arrangements easier.

Trusts

Trusts are more complicated documents that establish one individual (an heir, a lawyer, or another third party) to oversee arrangements after the grantor has died. If families involve divorces, step-children, and multiple branches that may not communicate well, or if the estate is larger and involves complex assets such as stock portfolios, patent dividends, or copyrighted materials, a trust is a more thorough way of organizing the estate. Trusts can also be arranged to disperse an inheritance over time, such as to pay for ongoing expenses for heirs or to be held for underage children or grandchildren until they are older. Trusts can also be implemented while the grantor is still living to ease the transition of the assets.

Living Wills

Living wills rarely deal with property or assets; instead, they deal with medical power of attorney issues for the grantor. Establishing a living will is a way to record an individual's wishes in case of mental incompetence or disability, giving another individual the authority to legally make medical decisions on their behalf. With controversy rampant about quality of life and ending life with dignity, a living will can give both the grantor and his family the peace of mind that the grantor's wishes are known and can be followed.

Planning Tips

Planning an estate is not an easy task, but by approaching it in small, clearly-defined steps, it is possible to create an equitable plan for both the grantor and his or her heirs. When planning your estate, consider the following:

  • Talk about your plans with close family members and friends. They may have suggestions about dispersal, and if they know your goals beforehand, there will be less rivalry when the plans are revealed.
  • Draft a thorough list of assets, including property, personal possessions, financial accounts, insurance policies, and other sources of income before beginning calculations of the estate.
  • Analyze the estate and determine if there are facets of the property that can be eliminated or consolidated through further financial planning, individual gifts, or liquidation.
  • Consider and list everyone you wish to be a beneficiary, including:
    • Relatives, including minor children
    • Friends or neighbors
    • Professional organizations
    • Charitable organizations
  • Make plans for immediate ongoing commitments, such as including provisions for pet care and creating a confidential list of passwords, pin numbers, and security codes that will be needed to finalize your estate.
  • Consider who to appoint as an executor. This person will oversee the estate's dispersal and should be trustworthy, responsible, and knowledgeable. Discussing estate planning with that individual will help him realize the various details you would like to be addressed.
  • Consult an experienced attorney with questions or concerns about the details of your estate. Attorneys specializing in wills or trusts can offer advice about how to arrange your estate with the fewest complications.

For More Information

Estate planning can be complicated, even if the estate itself seems straightforward. State laws and requirements vary for wills, trusts, and other planning documents, and experienced estate attorneys and financial planners are among the best resources for determining how to effectively plan an estate.

One way to find an attorney is to approach friends and family members and ask if they can recommend someone. The state Bar Association will provide referrals to experienced local attorneys. Consulting the local Yellow Pages brings names of local practitioners. Other resources include consulting the AARP, visiting a local library for updated planning books, or checking online resources such the American Bar Association's estate planning pages.

Estate Planning Basics