What is an Estate Plan?
An estate plan is a generic reference to a person's plan for the handling of their affairs upon their inevitable demise. In this context, the "inevitable demise" portion is broader than death--it refers to a plan in the event that one becomes unable to manage their affairs, meaning that one would be unable to make medical or financial decisions.
An estate plan is often associated with elderly people because it predominantly concerns the passing on of assets of a deceased person. More commonly these days, the need for an estate plan is prevalent for people suffering from dementia.
In reality, an estate plan is important for everyone because it could come into play for all sorts of accidents and disabilities that one could face, all of which could cost your family a fortune to deal with. If you are in a serious car accident, you may be unable to manage your affairs and if you do not have an estate plan set up, you may need a conservatorship.
The primary documents that people should be aware of for an estate plan are the following:
- Revocable Living Trust
- Last Will and Testament
- Durable Power of Attorney
- Advance Health Care Directive
Aside from these, there are various other tools that can be utilized as part of an estate plan. Some of these include:
- Business Entities (Corporation, Limited Liability Company, Etc.)
- Beneficiary Designations
- HIPAA Authorization and Release
- Life Insurance
- 529 Plan
While most people will not have complex estate plans, it is possible to utilize these tools effectively to maximize the amount that you can pass on to your intended beneficiaries. If you have a large amount of assets, then you might have a more complex estate plan than the average person.
Most people do not want to get into the details of their personal wealth or spend the time analyzing their situation, and thereby miss out on potential benefits of other tools of estate planning.
Though it seems complicated and expensive, if you think about estate planning in the grand scheme of what you are doing--transferring the entire wealth of one person to another--it's a relatively low cost to ensure that it is effectively implemented.
You may also be interested in:
- What is a Trust?
- What is a Last Will and Testament?
- What is a Power of Attorney?
- What is an Advance Health Care Directive? How is it different from a Living Will or a Power of Attorney for Health Care?
- What is a Probate?
- What is Probate Administration?
- What is Trust Administration?
- Will my Estate Be Subject to the Estate Tax When I Die?