The Essentials Of Estate Planning: What You Need To Know

the essentials of estate planning what you need to know

There are so many myths and misunderstandings around estate planning that prevent people from creating their plans – and creating instructions – when they should. A plan inherently benefits from proactive action; otherwise, a process becomes reactive, and that’s where things get complicated. 

If you wait until you have a medical emergency to set a plan in place, or you die unexpectedly, loved ones are forced into unimaginably difficult positions.

Estate Planning is Essential

In best-case scenarios, families and loved ones make choices that work but have nothing to do with what you would have wanted. In worst-case scenarios, the lack of proper estate planning means your estate is at the mercy of the probate process (and intestate succession laws), families become fractured due to lack of agreements, or the ones you love most must pour their own time, energy, and financial resources to take care of things.

We understand how hard it can be to think about your own mortality or traumatic events that might render you incapacitated. However, we work with clients daily who are “victims” of their loved one’s resistance to estate plans, leaving relatives to clean up the resulting financial and legal messes.

The good news is that estate planning can be very simple; you can continue adjusting, amending, and adding to your initial plan as the years go by. 

Phase 1: Keep it Simple

If creating a full-spectrum estate plan feels overwhelming, that’s okay. There are ways to keep it simple during the first estate planning phase. 

One of the essentials of estate planning is to Take care of any minors or special needs dependents

First and foremost, you must ensure there is a clear plan about who will take care of your minor children or special needs dependents if you die unexpectedly, are rendered incapacitated (unable to make decisions for yourself), or require long-term care as a result of an accident.

Without a guardianship plan in place, your children can wind up in extremely stressful situations, including family battles, inconsistent living spaces, and repeat transitions. This is an unfair situation during a time when they are already burdened with the emotional trauma of whatever has happened to you.

Create a basic advanced medical directive

An advanced medical directive can be very simple or very complex. However, at the very least, you should have legally binding documents that outline:

  • Who can make medical decisions for you if you cannot make them for yourself (called a medical power of attorney or a healthcare proxy). 
  • Whether or not you want to be on life support (under what circumstances, and for how long).
  • Live-saving interventions you would or would not want.
  • Comfort care measures you’d like to have in place for long-term hospital/acute care stays or through end-of-life scenarios.

Speak to your healthcare provider and ask for a copy of an Advanced Medical Directive form. You can also review free options online. Otherwise, we highly recommend visiting Five Wishes, where you can get digital and paper forms for a very small fee. 

Once you’ve completed a basic advanced medical directive, share it with all healthcare providers, your spouse/partner, your children (if age-appropriate), and any other immediate loved ones who should know and understand your choices.

Complete beneficiary information for all financial accounts

Most financial institutions provide the ability for customers to designate beneficiaries for their accounts (checking, savings, investments, retirement, etc.). When you die, they distribute the portion of funds allocated by you directly to the person/people you’ve selected. 

The beneficiary designation process can be done online or by phone, typically requiring the person’s legal name, birthdate, and social security number. You can leave the entirety of the account to a single person (anyone you choose, and it does not have to be family) or you can allocate percentages to multiple people. 

Determine who should inherit things that have value to you

Many make the mistake of thinking that estate planning is only for the rich. That’s not true. The more you have, the more sense it makes to create a detailed estate plan. However, as #1 and #2 above highlight, there are some things that every adult should plan for “just in case.”

Whether you’re financially comfortable or not, odds are there are things in your possession that have value to you. If you care about who they will go to – or where they’ll end up – then write that down. These are called “bequeaths” and can be handled via a will rather than a trust

Do you own your own business?

If so, you should consult with a business lawyer and an estate planner, as this one hovers on the border of Phase 2 estate planning – depending on the size or success of the business. 

Estate planning as a business owner or entrepreneur is important, especially if you have partners or your spouse/former spouse is/was heavily involved in the business’s success and wealth generation.

Phase 2: Estate Plans Grow With You

Our lives, relationships, and financial realities evolve over time, making it important to create an estate plan that grows with you. We recommend reviewing your estate plan annually. You’ll be surprised how even a single year can bring about changes that render portions of an existing plan irrelevant. 

For example, if the people you selected as guardians get divorced or move away, you may want to reconsider. Your thoughts about life support or medical interventions may change with time. Or, as your financial wealth and property ownership develop, so too should the estate plan – moving from a simple will to a family trust designed to provide financial and tax benefits to you and your heirs.

The second phase of estate planning is for those who know they need more than the basics they created during Phase 1. During the second phase, you should consider things like:

All these and more are reviewed and facilitated when working with an estate planning attorney.

Learn What You Need To Know About the essentials of Estate Planning With Tseng Law Firm

We understand that estate planning can feel overwhelming. That’s why Tseng Law Firm takes a phased approach. It starts with a free, no-obligation consultation call. From there, we can schedule a one-time – or series of appointments – based on your needs. 

Contact us to schedule an estate planning session and experience invaluable peace of mind knowing your affairs are in order and that you and your loved ones are completely taken care of in alignment with your wishes.