What is estate planning?
- An "estate" is a legal term that consists of all of a person's property
- An estate plan controls the management, distribution, and protection of those assets
- An estate plan provides for control while you are incapacitated and after your death.
When many people hear the term “estate” they picture a multi-million dollar mansion on a hill somewhere. However, that is not an accurate depiction of what an “estate” is. An “estate” is simply, the complete collection of your property (vehicles, bank accounts, house, etc.). Estate planning is simply the process of providing means of protecting, managing, and distributing your estate. Estate planning can best be described as planning for two scenarios.
The first scenario is one’s incapacity. A complete estate plan has powers of attorney in place to allow for someone else to manage one’s assets after they have been determined to lose the ability to manage them. Scenario number two is planning after one’s death. This is generally what people think about when talking about an estate plan. Planning after one’s death is done through several different instruments: last will and testament, personal property memo, trusts, and through various forms of beneficiary designations. The goal of a well-crafted estate plan should be to get the entirety of one’s property transferred as quickly, cheaply, and efficiently as possible. This generally means avoiding the probate court.
Some of the key aspects of an estate plan include naming guardian for any minor children, providing means of protecting your assets, providing control over the distribution of assets, providing tax reduction or avoidance, and preventing waste. The exact method of accomplishing these goals is dependent on the documents and type of plan created. Overall, estate planning is simply the planning of your death or incapacity and how your property will be managed and distributed.