Estate Planning 101: Do You Know Where to Start?
If you see the words “estate planning” and think it doesn’t apply to you, consider this: estate planning isn’t just for the wealthy. If you own a house, a car, furniture, investments, insurance policies or all of those things, that’s your estate! Estate planning simply means you’re providing direction about what should happen. Whether modest or massive, you should have a plan in place.
Estate planning is considered to be much more than just who gets your things in the event of your death; it allows you to help make sure your loved ones are taken care of and protected. In essence, establishing an estate plan is a gift to your family. You’ve done the work of thinking about how to handle things so that they won’t have to during difficult times.
In your estate plan, you can outline things like:
- Legal guardians for children
- How to handle, and who can make, medical decisions when you can’t
- Asset ownership
- Endowments or trusts
Pieces of an Estate Plan
There are a few main elements you should consider when beginning your estate planning journey: Wills, Trusts or Endowments and Power of Attorney.
Begin with your wills. Did you know there are two kinds you should create to make sure your family is protected? Both are important and are a good start to estate planning.
- A last will is the document that establishes who gets what in the event of your death. You can be as detailed as you’d like.
- A living will is a document that explains your wishes for medical care in the end stages of your life. You can specify things like what treatments you are or are not okay with and even which doctors you want to be seen by, and also establish power of attorney.
Defining Power of Attorney is a crucial piece of estate planning. This allows you to select a person to act as your decision maker in the event you become unable to do so yourself. The Power of Attorney can be assigned for several circumstances, but primarily it’s created for finances and healthcare. A durable power of attorney is a legal document outlining the designated individual(s) who may act on your behalf in a financial or healthcare decision if you are unable. While it may not be necessary to hire a lawyer to draft the legal document, one may help simplify the process and ensure all potential outcomes are covered. Once formalized, the designated individual gains authority to make decisions about your medical, business or financial well-being and management.
Power of attorney designations can change throughout the course of your life at your discretion. And, once engaged, they do not have to be permanent. If you fall too ill to manage your affairs, your power of attorney can act on your behalf. If you then recover, your power of attorney is no longer your decision maker – you are.
Having an individual in place who can step in when you are unable helps provide you with peace of mind and helps reduce the chance for any confusion or burden from your loved ones.
Another good addition to your estate plan is a trust. A trust is an arrangement where a person or institution, like a bank or law firm, controls assets for another person. In these arrangements, assets are transferred by that institution to a designated person in the event of your death.
A trust can be beneficial for two main reasons:
- It can help avoid probate and limit estate taxes, thus transferring assets to your loved one much faster.
- It can be set up to follow guidelines or to require recipients to meet conditions you define. This allows you to define exactly how your assets will be rewarded after you’re no longer here.
If you have additional finances you’d like to use to donate to charitable causes, you can also establish an endowment as part of your estate plan. An endowment provides money to a charitable cause during or after your lifetime through establishment of an investment fund.
Plan for the Future Now
Estate planning benefits your loved ones, and it also benefits you. It is a way to ensure that your assets, and your investments – like life insurance policies and annuities – make it in to the hands of your loved ones.
Contact your financial advisor today to help prepare for whatever your future may hold.
Mutual of Omaha Investor Services, Inc. and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax or legal advisor regarding your specific situation.
Consult with a professional tax and/or legal advisor before taking any action that may have tax or legal consequences.
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