Most Americans believe estate planning is a luxury best left to the upper echelons of society. Research seemingly affirms this notion, with data from a 2023 study showing that less than a third of Americans have an estate plan.
However, this could not be further from the truth—anyone with assets should take time to prepare an estate plan. In the following blog, you will learn about estate planning, including the parties to the plan and the documents involved.
What Is Estate Planning?
Simply put, it is a way to plan for how your wealth will be handled in the event of your incapacity or death.
Let’s face it: Passing on is inevitable, and given how unexpected life can turn out to be, it’s only prudent to plan for your estate when you have your wits about you.
If you fail to take on this responsibility, regardless of how large or small your estate is, the responsibility is left to the court. Speaking to attorney Caryn Rivett West of Parks Zeigler, PLLC can help in estate planning. Granted, the legal system will try to act in the best interests of your family. However, this does not necessarily imply that its decision will reflect your wishes, even in death.
Therefore, to prevent potential conflict when you are no longer in a position to make decisions as to how your wealth should be divided, it’s best to plan your estate as early as possible.
Fortunately, you do not have to do this alone. You can and should enlist the help of professionals in this field, such as estate planning firms, accountants, and financial advisors. Professionals can help you plan things out properly, and create watertight plans that hold value even after you are gone.
Parties to the Plan
With the help of the mentioned professionals, one of the first things you will do is define parties to your estate. Here is an outline:
- Testator: The owner of the assets in discussion.
- Beneficiary: An individual or institution set to benefit from the plan.
- Fiduciary: This party can also be an individual or entity. The testator appoints them to act on their behalf and manage the estate for the beneficiaries. Here are examples:
- Guardian: Takes care and makes decisions on behalf of a minor or incapacitated person.
- Executor: A personal representative of the testator.
- Trustee: They administer assets placed in a trust.
Estate Planning Documents
With the parties well explained, let us now discuss the documents you will need. See below:
- The Will: Dictates how the testator’s assets will be distributed upon their death, naming all relevant beneficiaries along with the executor.
- Trust: A contract between the testator and the trustee authorizing the latter to hold assets on behalf of the grantor. They are bound by a fiduciary duty to act in the best interests of the beneficiaries.
- Durable Power of Attorney: Designates an individual to make decisions on behalf of the signer.
- List of Digital Assets: Contains the testator’s digital assets along with their login information. Beneficiary Designations: Names the recipients of the non-probate assets such as life insurance plans, pensions, and 401(k) accounts.
Do You Need an Estate Planning Lawyer?
You will most often need the assistance of an estate planning attorney. They can help ensure the probate process is short, minimize estate tax, and help you deal with out-of-state assets. However, if all your assets are in a beneficiary-designated account, their services may not be necessary. However, if all your assets are in a beneficiary-designated account, their services may not be necessary.
Conclusion
Estate planning is by no means a rich man’s affair. So long as you have assets, you should dedicate time and resources to ensure smooth transition to your loved ones in the event of death or incapacitation. An estate lawyer can streamline the process using best practice to minimize tax liabilities and shorten the process.