Planning Life’s Biggest Vacation: Estate Planning

Presented by EMILY PROMISE AIF®, APMA®, CRPC®

Part of planning for ‘life’s biggest vacation’, aka retirement, involves not only making sure you are saving money to help make your goals and dreams come true, but also planning in the event that something happens to you. It is never pleasant to think about, but preserving all that you have worked for is very important.

By definition, estate planning is a process designed to help you manage and preserve your assets while you are alive and to conserve and control their distribution after your death according to your goals and objectives. But what estate planning means to you specifically depends on who you are. Your age, health, wealth, lifestyle, life stage, goals, and many other factors determine your particular estate planning needs. For example, you may have a small estate and may be concerned only that certain people receive particular things. A simple will is probably all you will need. Or, you may have a large estate, and minimizing any potential estate tax impact is your foremost goal. Here, you will need to use more sophisticated techniques in your estate plan, such as a trust.

Elements of an estate plan
A plan generally comprises four elements:

  1. The last will and testament is a blueprint that directs who will receive your property upon your death and the specific circumstances in which they will receive it. Your will governs only property that flows through probate. For example, financial assets with beneficiaries other than your estate, jointly owned property with rights of survivorship, and assets in a trust funded during life are not distributed under the terms of your will.
  2. The durable power of attorney (POA) authorizes someone, often called an agent, to handle your financial affairs if you were to become incapacitated. Without a durable POA, your family members would have to institute legal proceedings and request a probate court to appoint a guardian to carry out these responsibilities.
  3. The health care power of attorney (HCPOA) is a document that authorizes someone to make health care decisions if you are not able to. It can also allow your wishes to be known about end-of-life decisions in the event that you are unable to communicate. The latter may be part of your health care POA document or an advanced medical directive, also referred to as a “living will.”
  4. trust is a formal arrangement allowing the trustee to hold assets. The trustee distributes assets to your beneficiaries at the time that you direct in the trust document. There are two basic types of trusts: a living trust and a testamentary trust. A living trust is funded during your lifetime and may receive your estate assets after probate is complete. It is often called a revocable trust because you retain the right to make changes or remove property during your lifetime. A testamentary trust is created after your passing and your will is approved by the probate courts.

Important considerations

Estate planning can be complex. It is important to keep the following in mind:

  • Be sure that your beneficiary designations reflect your wishes. Contact your current and former employers, your financial advisor, and your life insurance agent for the required paperwork to make any changes, if necessary.
  • Don’t make the mistake of assuming a change in your circumstances, like a remarriage, will make a prior designation null and void. Always make beneficiary changes on the correct paperwork specific to the financial institution.
  • Include both primary and contingent beneficiaries for your accounts. If your primary beneficiaries die before you, without a backup beneficiary, the death benefit would be paid to your estate. This can result in unnecessary fees and delays associated with probate, as well as accelerated taxes.
  • Relatives with special needs or disabilities rarely inherit directly. Receiving an inheritance outside of a special needs trust could mean the loss of valuable government benefits.
  • You can name a beneficiary of your retirement accounts, but be aware of the tax impact. In the end, the advantages of having the retirement accounts managed by a trustee may outweigh the tax disadvantages.

Remember that your plan should be reviewed every year or so and should reflect any life changes. Perhaps you got married, had children, lost a spouse, remarried. All these life changes will require review of your estate documents to reflect new beneficiaries or other changes.

Working with your financial advisor in conjunction with an estate attorney can help you plan for life’s biggest vacation and help preserve the legacy that you have worked so hard to achieve.

Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other expert advice we can provide towards your financial well-being.

EMILY PROMISE is a financial advisor with BLAKELY FINANCIAL, INC. located at 1022 Hutton Ln., Suite 109, High Point, NC 27262 and can be reached at (336) 885-2530.

Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals.

Securities and advisory services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser

Prepared by Commonwealth Financial Network and Broadridge Advisor Solutions