Estate Planning Basics: Everything You Need to Begin

Mike Tallman

Everyone should have an estate plan, especially when approaching retirement. Estate plans clarify your wishes, preventing anyone from guessing where you’d want your assets to go if something were to happen to you. They also help with tax planning.

If you’d like to start estate planning, there are a few things you should be aware of. Here, we’ll provide a detailed overview so that you can take the next steps toward planning your estate the right way.

When it comes to estate planning, preparation is key. Here’s what you should know:

Bare Minimums to Begin

Everyone with an estate plan needs at least a last will and testament and a power of attorney in place. Some people may choose to add a living trust or advance directive (medical directive) as well.

However, while these components are important, the will and power of attorney make the top of the list for priorities.

Last Will and Testament

A last will and testament should be included in every estate plan. It includes details on what an individual would like to happen with their assets and those in their care if the unthinkable were to happen. The last will and testament is presented to the court in the probate process upon the passing of an individual.

The last will and testament should make it clear where each asset should go, such as to a family member or a charitable organization. It should also make it clear who will get custody over any minor children and who shall be responsible for overseeing the financial accounts. The responsible party is the personal representative of your estate.

Power of Attorney

A power of attorney is one of the most important parts of your estate plan, as this individual can make financial decisions for you if you are not able to do this on your own for some reason.

Your power of attorney will oversee your finances and can prevent court intervention since your wishes will be clearly outlined in your estate plan. If you choose your power of attorney yourself, while you are in a sound mind to do so, you can feel confident that this person has the mental capacity, experience, and integrity to ensure that your finances are managed the way you would have wanted.

Other Highly Recommended Components of Estate Planning

In addition to a last will and testament, and a power of attorney, consider the following components for your estate plan:

Medical Directives

A medical directive is a document that declares how you want your medical care to be handled if you don’t have the ability to make these decisions. It should answer a variety of healthcare questions, such as whether you’d want to be resuscitated if the worst were to happen. It should also include your requests for medication, end-of-life care, and organ donations.

This document can remove the question marks in healthcare emergencies, preventing family members from wondering whether they made the right decision. Medical directives outline your wishes in-depth so that your loved ones know what you want to do when it comes to medical care.

Beneficiary Designations

It is essential to designate beneficiaries for each of your retirement accounts and life insurance plans so that there is no question or disagreements about who gets what. It is also vital to update the beneficiaries for each account periodically in case anything changes with your estate plan.

What happens if you do not designate beneficiaries? Your assets and accounts may have to go through probate which can delay your loved ones from receiving any death benefits. It also may mean that the transfer is subject to income tax at that time, which can lead to less money to beneficiaries and more paid taxes.

To ensure that your family members are cared for, update your beneficiaries as needed. Also, feel free to consult us if you need guidance during this process.

Living Trust

A living trust resembles a will in that it outlines your wishes for your estate in the event of death or incapacity. This document can reduce the chance of probate since you already have everything set up legally with a trustee (e.g., a trusted friend or family member, lawyer, financial institution, or beneficiary to your estate). Even if you have a living trust, you should still have a will in place.

The trustee will oversee the assets included in your trust. It is common for people to put their kids or other family members as the trustees in the event of death. However, they may have someone else in charge of the living trust as long as they are alive.

Testamentary Trust

A testamentary trust is a trust put into place through your will. It does not get implemented until after you pass. Typically, a testamentary trust is put into place to control assets for your children or help minimize estate taxes.

How to Know Which Parts You Need

You know yourself better than anyone, and you are the best judge on what you need in your estate plan. However, when you choose Community First Bank and HFG Trust as your financial partner, we can guide you through the estate planning process and help you establish an estate plan that best reflects your goals and wishes.

As we mentioned above, it is vital to have a last will and testament and a power of attorney to ensure that your assets and dependents are accounted for in the case of your untimely passing. It can also prevent your financial decision-making from going to court and ensure that the task is in the hands of someone you know and trust. Our team can help you decide if other components, such as a medical directive or trust, would be beneficial for you based on your circumstances

We Can Help

Unsure how to start estate planning? You don’t have to navigate this alone. Community First Bank and HFG Trust is here to help you prepare the necessary documentation for your estate plan, choose the right beneficiaries for different assets, and minimize the tax liabilities that your beneficiaries may incur from the inheritance.

We are also proud to offer other estate planning services, including but not limited to:

  • Estate sale assistance
  • Probate assistance
  • Home and property sales

Create an estate plan with confidence utilizing the guidance of our certified team of experts. For more information about our estate planning services, get in touch with our team today.

 

Mike Tallman, CFP®, CTFA
Financial Advisor