Estate planning is the process of preparing for the distribution of your assets after you die or become incapacitated.
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by Carolyn Albee
Carolyn has been a freelance writer for 15 years, covering a variety of legal topics, from personal injury to crimina...
Updated on: July 29, 2024 · 9 min read
Are you curious about estate planning but think it sounds like something that’s just for millionaires? Or maybe you know you need an estate plan, but you’re not quite sure how to get started. There’s good news: Estate planning can benefit anyone regardless of what you own, and it’s easy to take that first step. Just start by learning about some estate planning basics, and connect with an attorney when you’re ready.
While it may seem complex at first glance, estate planning is much simpler than most believe. At its core, it involves creating legal documents like wills, trusts, and powers of attorney to protect your estate after you’re gone. Estate planning also ensures that your wishes are followed, minimizes taxes, and provides peace of mind for your loved ones.
An estate plan provides a clear roadmap for your loved ones to follow after your death or incapacitation. A complete estate plan helps you:
Estate planning can feel like a big task, but as with any goal, the most important step is the first one. This estate planning checklist can help you get started and stay organized.
As you begin to learn more about estate planning basics, you’ll see a few documents that pop up again and again. Here’s what you need to know about common estate planning documents.
A will is a legal document that ensures your wishes will be respected. A last will takes effect upon your death. It outlines how your assets and property will be distributed, and it can also designate guardians for minor children. A living will, also known as an advance healthcare directive, outlines your wishes regarding medical treatment and end-of-life care.
A trust is a legal arrangement in which a trustee holds and manages assets for your beneficiaries according to terms you set as the trust creator. With a revocable living trust, you can alter your beneficiary designations or even dissolve the trust during your lifetime, but it becomes irrevocable upon your death. In contrast, you can’t change an irrevocable trust once it’s established, which offers greater protection against creditors.
A durable power of attorney, also called financial power of attorney, is a legal document that grants a trusted person the authority to make financial decisions on your behalf if you become incapacitated. Without it, a court will have to assign someone to manage your affairs, which can be a long and costly process.
Healthcare power of attorney designates someone to make medical decisions for you if you’re unable to do so. It’s typically included in a living will but can also be a separate legal document. With this designation, you can be confident your medical wishes will be honored.
A letter of intent is a non-legally binding document that provides specific instructions, wishes, and information to your executor, family members, and friends. It can include details about your financial affairs, desired funeral arrangements, care for your pets, handling of digital, physical, and intangible assets, and personal messages.
Guardianship designations specify who will take care of your minor children if you die or become unable to care for them. Keep in mind that if you’ve created a trust as part of your estate plan, you still need to designate a guardian separately. A trustee is only responsible for managing and distributing your assets—providing food, shelter, transportation, and love falls to the guardian.
You don’t necessarily need an attorney to make an estate plan, but it’s a good idea. They can help you avoid common estate planning mistakes and correctly prepare your documents so they’re legally binding. It’s an especially good idea to hire an estate planning attorney if any of the following situations apply to you.
The estate tax from the federal government only applies to assets of more than $13.61 million. However, some states also have their own taxes. For example, in Oregon, assets over $1 million are taxed—an amount many people easily reach with only their homes, investments, and retirement accounts. An attorney with experience in your state can help you make a valid estate plan to minimize your tax liability.
Anyone with property, investments, or valuable physical assets, like expensive cars, art, or jewelry, needs an estate plan to specify how those assets should be handled. In addition, you’ll want to be sure you set up trusts using the right legal language. An attorney can help you determine which type of trust will best protect your assets.
If you own a business, your estate plan needs to minimize taxes and streamline business succession. For instance, you might need to create a buy-sell agreement to outline what happens to the business upon your death. An attorney can make sure the business you worked so hard to build is protected.
A complex family situation may require a more complex estate plan. For example, if you’re in a second marriage and have children from one or both marriages, you may want to set up a qualified terminable interest property (QTIP) trust to make sure everyone is provided for. Or, if you have a special needs family member, you can set up a special needs trust to support them.
For individuals with chronic health conditions or disabilities, it’s important to have an estate planning attorney create documents like durable powers of attorney and healthcare directives. These estate planning documents help your family members advocate for your needs when you cannot.
The cost of estate planning varies based on the complexity of your needs and which documents you want to set up. Many estate planning lawyers charge by the hour, with rates ranging from $150 to $400 per hour or more. On average, creating a basic will might take around four to eight hours. A more complex estate plan, for example, including a revocable living trust, could take 10 to 20 hours or more.
You can also find estate planning services for a flat rate, either per document or as a bundle. For example, LegalZoom’s basic will package includes a last will and testament, healthcare directive, durable power of attorney, and HIPAA authorization and starts at $149. You can also set up a living trust starting at $399.
Want more guidance from an estate planning lawyer? You can also get professional estate planning advice. With the right assistance, you’ll soon have confidence that your estate—and your loved ones—are protected.
Yes, hiring an estate planning lawyer is worth it. They provide expert guidance, ensure legal compliance, and help you avoid costly yet common estate planning mistakes. The best estate planning attorneys also tailor your estate plan to your specific needs and state laws.
Survivorship life insurance policies provide a payout after both policyholders die. These policies avoid probate court and provide immediate cash flow that can be useful to cover estate taxes or provide financial security.
The executor administers your estate by managing assets, paying debts, and distributing property according to your will. They play an essential role in ensuring your wishes are fulfilled, and the estate is settled efficiently and legally.
Without a will, your estate is distributed according to state intestacy laws, which may not reflect your wishes. Leaving your estate to the courts can also mean prolonged legal processes, additional expenses, and potential financial hardship for your loved ones if they can’t access their inheritance.
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