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What is Estate Planning? What does it involve?

What is Estate Planning? What does it involve?

By 

Jennifer Mcgee

·

Updated on  

November 22, 2022
·

5 mins

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On 18th September 1970, Jimi Hendrix died intestate at the young age of 27. The battle for the distribution of his estate continued for 30 years. If he had made a last will and testament, his estate would have been divided as he wished, but unfortunately, his family and loved ones had to suffer through a long legal trial. 

Now you might not have a complicated estate like Jimi Hendrix, but you would want your legacy passed down to your family and loved ones without any hassle. Knowing the importance of estate planning and having a plan is the easiest way to ensure this. 

What is an Estate plan?

Making an estate plan is simply arranging how your assets will be distributed after your death. Knowing that your family is safe and secure, even if something happens to you, will give you peace and help you live happily in the present. 

Your estate refers to anything that you have owned in your life. For a musician like Jimi Hendrix, his estate would also include the rights to his music, albums, etc. If you own a business, your estate would include your business acquisitions; if you have invested in stocks, it would consist of them, and so on and so forth. 

Estate planning generally involves the simple task of making a Will. There are several other documents that can also be obtained to protect you and your loved ones. Some of these include:

Last Will and Testament:

This is the document where you will add any details or wishes about how you wish to distribute your assets.

For e.g., Jimi Hendrix could have added that his estate would be passed on to his father or to a charity that he was passionate about. 

Durable Power of Attorney

This document allows you to name the person who will be responsible for making financial decisions on your behalf if you become incapacitated. 

For e.g., Jimi Hendrix could have named a person who would handle the licensing rights to his music.

Healthcare Surrogate

A surrogate healthcare designation allows you to choose a person, to make medical decisions if you are unable to do it yourself. 

For e.g., If you are in a situation where you are unable to make any decisions for yourself, perhaps in a coma, on a ventilator, or have suffered a critical injury that leaves you paralyzed.

There are other documents like a Pour-Over Will, HIPAA Authorization, and a Living Will that can also be included while making an estate plan. 

How to make an estate plan?

While everyone needs an estate plan, it still needs to be customized to your needs. If you have a nuclear family, your estate plan will differ from someone having a larger family. Similarly, if you are single, your plan will be different from someone who is married or someone with or without children. Either way, you should follow this estate planning checklist and these steps for a simple plan:

  1. Inventory your estate: You should list down and divide all your tangible and intangible assets that you've accumulated. 
  2. Family needs: You should assess and decide the amount of life insurance your family would need and what you can afford. Decide who will be the guardian for your children and list down your wishes for your children's care.
  3. Establish directives: You should read more about a will vs. trust and decide what would be better for your estate. Prepare your advance Healthcare directive and decide who would be your medical and financial power of attorney. 
  4. Decide the beneficiaries: Decide and mention who gets what, and review them before finalizing the document. 
  5. Store the documents: Ensure that you store your estate planning documents in a safe location that is accessible to your loved ones and the beneficiaries. 

You could also make an online last will and avoid spending a lot of money and time.

Why make an estate plan?

You might think you are too young to make an estate plan, but death is uncertain and inevitable. Making an estate plan helps you to make sure that your family and loved ones don't have to stress when they are already grieving. It allows them to know your wishes and be provided for without spending a lot of time on court hours.

Especially if you have kids, it is of utmost importance to make sure that you name a guardian for them. 

  • In case of an unexpected death of both parents, having a trusted family member to take care of your children, their education, and their life is important. 
  • In worst-case scenarios, without an assigned guardian, children can end up going to foster homes and siblings being separated.
  • If you are a pet owner, you should also mention whom you would like to take care of your pets in your Will.

You can consider getting an attorney who will help you in the process. Though, it can be a tad bit expensive and time-consuming task. 

Another easy way to do estate planning is by making an online Last Will. This is a simple and cost-effective strategy, especially if you do not have a complex over-complicated financial situation. Read more about how to make estate planning less complicated.

The most important reason to make an estate plan is to live a relaxed and stress-free life without being worried about your family's future. You should cherish and enjoy the moments with your family in the present, as you will have made sure that their future is in safe hands.

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Frequently Asked Questions

Do I need a lawyer to make my last will and testament?

There's generally no need to get a lawyer to make your will. You could use an online platform and easily make it within minutes. Only some special cases, like complex family relations, may require you to consult an attorney.

What does a personal representative/executor do?

The executor of your will would be responsible for managing and settling your estate distribution after you pass away. It's always better to name a trusted adult as your personal representative.

What are the tools for estate planning?

Your will, trust, living will, power of attorney, and life insurance are the five key tools for estate planning.

What is a beneficiary?

A beneficiary is a person who would inherit your estate according to your will.

What are the estate planning goals?

The main goals would be to provide for your family and loved ones, minimize taxes, and avoiding probate.
Jennifer Mcgee
Parent to five young children. Expert in Estate Planning, Probate, and Family Law Matters. Volunteer with Victim’s Advocates in the local sheriff's department...
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Got Questions?

Hi, I’m Jennifer McGee.

Co-founder & Head of Legal at TrulyWill

Feel free to book a call with me to help you with your estate plan.

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