Estate Planning

Estate planning involves the process of an individual or family arranging the transfer of their assets in anticipation of death or serious disability. Estate plans seek to maintain the maximum amount of wealth available for intended beneficiaries and flexibility for the current owner of the estate prior to death. Federal and state tax laws complicate the process for drafting estate plans.

What an estate is, and what gets distributed

An estate is defined as the total property — encompassing real and personal — owned by a person prior to its distribution via a trust or will. Real property is physical real estate. Personal property includes every other tangible asset: automobiles, planes, household items, and financial wealth. Estate planning distributes both real and personal property to a person's heirs or designated beneficiary.

Wills and trusts

Wills and trusts are the most common ways for people to distribute their wealth. Wills are simpler to set up but require probate — an extended and expensive legal process that guides the transfer of assets through the court. Trusts avoid probate and let you keep control over how and when your beneficiaries receive what you leave them.

The documents most plans include

Beyond a will or revocable trust, most estate plans involve some combination of:

• ·Durable power of attorney — appoints an agent to handle financial affairs if you become incapacitated.
• ·Healthcare power of attorney — appoints a trusted family member or friend to make medical decisions if you can't.
• ·Living will — your written instructions about end-of-life medical treatment.
• ·Revocable living trust — a structure that holds your assets, avoids probate, and lets a successor trustee step in if you become incapacitated.
• ·Beneficiary designations — for retirement plans, annuities, and life insurance.

When to update your plan

We recommend reviewing your estate plan every 3 to 4 years. Update it sooner when federal or state estate or tax laws change, when your family situation changes (birth, death, marriage, divorce), or when your financial situation changes substantially.