Estate planning is a broad term that encompasses planning during lifetime and at death. It is first important to understand, what is an estate? Broadly speaking, your estate is everything you own during lifetime and at death. This means:
- Real estate
- Retirement accounts (IRAS, 401ks, TSP, 403b, etc)
- The death benefit of life insurance
- Tangible Personal property
- Business assets you own
And anything else that you may own.
Since we can see that the estate is a broad term encompassing essentially everything that you own, we can start to see how important estate planning is. Estate planning is the act of putting together legal documents to ensure that these estate assets will be properly managed during your lifetime and at death. In order to plan for an estate we need a number of different documents.
In order to plan during lifetime, one of the key documents is a financial power of attorney. A financial power of attorney allows you to name someone to step into your shoes from a financial standpoint to manage your affairs during your lifetime. As we have already discussed, estate planning is not only to plan for assets upon death.
However, in order to plan for those assets upon death, there are two tools that we most often use. A traditional last will and testament and a revocable living trust. A last will and testament is a tool that allows you to name an executor to administer and distribute your solely owned assets upon death. A last will and testament can be thought of as written instructions to the probate court on how to administer your estate.
A revocable living trust is a different way of titling your assets during your lifetime, allowing you to name a trustee to effectively manage those assets both during your lifetime and upon death.
We have different tools to plan, but the ultimate issue is very clear. Everyone has an estate, it is simply whatever they own both during lifetime and at death and in order for those assets to be effectively managed during your lifetime and at death it is crucial to have a plan in place using a number of different legal documents.
If you have any questions about your estate planning and your options contact your local estate planning attorney today.