Understanding the Basics of Estate Planning: A Beginner’s Guide

Understanding the Basics of Estate Planning: A Beginner’s Guide

Many people know that estate planning is important, but they are not quite sure what it involves or why it is so critical at all stages of life. While estate planning does direct the disposition of your assets after you pass away, it also covers quite a bit more, including strategies to protect you during your lifetime. Moreover, estate planning involves your physical health as well as financial matters.

In this guide, we will explain common estate planning tools and how they work to keep you and your loved ones protected.

Planning is the Key Word

The goal of estate planning strategies is to take the best steps to prepare for the future. Those steps might involve creating legal documents, but they also often involve other tasks, such as changing ownership of property, making certain purchases sooner rather than later, or giving gifts to loved ones.

Estate planning is a planning process that starts with an assessment of your situation and goals. Then your estate planning attorney develops a plan to help you reach those goals and to prevent as many problems as possible in the future. We know that someday we will pass away, so we should prepare for that eventuality, but we also need to prepare for things that may or may not happen.

What Would Happen if You Were to Become Incapacitated?

An accident or illness can strike anyone at any time. If you were unconscious for an extended period, the right estate planning preparations would prevent many potential problems. Having a health care power of attorney would enable an agent you have chosen to authorize medical treatment and make health care decisions on your behalf while you are unable to make or communicate your own choices. This prevents vital treatment from being delayed. If you were incapacitated for a long period, perhaps due to mental illness, a health care power of attorney could prevent your family from needing to petition the court for guardianship, which is a very complex proceeding.

Your financial matters also need tending while you are incapacitated, so it is helpful to have a durable financial power of attorney ready. This document enables your chosen agent to pay your bills and complete other tasks to keep your financial affairs in order. You can decide how much authority to grant with a power of attorney. This document also can prevent the need for guardianship proceedings.

Planning for Your Children

In case something should happen to you while your children are still minors, you should have plans ready to provide for their needs. Your estate planning attorney can prepare a will that nominates a guardian to care for your children. In your will, you can also set up a testamentary trust to hold and manage the property your children will inherit.

Providing for Loved Ones

There are several different estate planning tools you can use to provide for your loved ones. If you need to make special provisions to care for someone with special needs, it might make sense to establish a special needs trust to provide assistance in the long term. To transfer assets to loved ones after your death, you can use a traditional will or set up a revocable living trust, which enables your property to bypass the probate process, saving time and money.

You can also make use of beneficiary clauses, co-ownership strategies, and other tactics to enable your property to pass quickly and easily to those you wish to support. If you don’t make any plans, then all your assets will need to go through probate, and they will be distributed according to the Missouri laws of intestate succession. The results may not be what you or your loved ones would wish.

Tools of Estate Planning

Your estate plan will be built for your specific needs, so it will be different from that of anyone else. However, here are some components that could be part of your plan:

  • Will to nominate a guardian and direct disposition of your property
  • Revocable living trust to pass your property outside of probate
  • Durable financial power of attorney to authorize someone to handle your money in an emergency
  • Health care power of attorney to authorize someone to make medical decisions in an emergency
  • Living will to specify your preferences for end-of-life care if you cannot communicate
  • HIPAA authorization to allow loved ones access to your medical information in an emergency

If you have specific goals such as trying to qualify for Medicaid long-term care benefits, reducing estate taxes, or protecting money from potential lawsuits, your plan might include one or more irrevocable trusts. A trust is an entity created to hold property for the use of a beneficiary, and when a trust is irrevocable, the property is protected from creditors and not counted as yours, which can work to your benefit if you’re establishing eligibility for means tested benefits or reducing your tax base.

Learn More About Developing the Right Estate Plan

At Inhulsen Law, we take the time to listen to our clients’ concerns and learn about all the factors that should impact their estate plan. Then we explain options and build a plan designed to meet needs in the near and distant future. We can also review and update plans made earlier, because life changes all the time, and plans usually need to be adjusted to keep up.

Contact our team today to learn more about getting estate planning solutions that provide peace of mind today and protection for tomorrow.

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