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Back to Basics: Estate Planning 101

| November 12, 2021
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You and your family have worked hard to create a legacy. You’ve followed the appropriate steps in planning for your family’s future and have prepared for every possible situation and circumstance – or have you not?

Many believe that they are positioned to properly transfer their assets to their loved ones when time comes, but chances are, not all may be in order.

Picture a heated scene in a daytime soap opera – a loved one passes and disagreements regarding assets bubble to the surface, with financial burden unnecessarily placed on those responsible for organizing and figuring out what to make of an estate plan with incomplete or inaccurate documentation. No one wants to play a role in that scene!

Proper, judicious estate planning may not only help preserve the value of your assets and minimize wait time for disbursements, but your legacy will be carried out how you envisioned, reducing the risk of additional probate and tax expenses, contests from beneficiaries, or legal battles.


What is estate planning?

By definition, estate planning is the preparation of tasks that serve to manage your assets in the event of your incapacitation or death. Estate planning also includes designation of heirs to specified inheritance and any future estate taxes you must pay. Many estate plans are executed with the help of experienced attorneys and financial professionals.


Do I need an estate plan?

Although it may be an uncomfortable topic, it is important to plan for life events, including accidents or death. If the unimaginable happens, having planned your estate, you have positioned yourself well for your assets to be distributed accordingly, seemingly with little to no gray area.

Establishing basic estate planning documents is an important step to take in every stage of life, including planning for your children and younger family members. In the United States, you are a legal adult at age 18, and are responsible for your medical and legal decisions. If you were to become incapacitated or unable to make these important decisions, a parent or guardian is required to produce legal documentation such as a Power of Attorney or Health Care Proxy to make decisions on your behalf.

Conjuring up that soap opera image again, families or loved ones may grapple or find themselves at odds with one another if a proper plan has not been enacted for the lost life. Surprising to many, a proper estate plan is more comprehensive than drafting and signing a will; there are many tasks to consider, including creating a lifetime plan and a testamentary plan.

A lifetime plan may involve choosing decision-makers for any health or financial decisions on your behalf if you should become incapacitated. For some high-net worth individuals, this may include some necessary planning in establishing tax-efficient gifting strategies.

A testamentary plan is the designation of individuals who or charities that will inherit your assets upon your death. A testamentary plan may appoint a guardian to care for and look after minor children, an executor to administer your estate, and a trustee to oversee any trusts that may be created after your death. A well-crafted testamentary plan should also include tax-planning strategies.


While estate planning may seem like a lot to process, acknowledging and understanding the importance of a comprehensive estate plan likely will benefit you and your family in the years beyond your time.

If an individual dies without having a valid will or other estate planning documents, he or she is classified as “intestate.” Intestate succession can be tricky as heirs will be grouped and a specific order will determine who is entitled to an inheritance. Depending on the state in which the deceased resided and differences in state laws, there may be costly probate court expenses, inefficient evaluation of assets with tax consequences, and lengthy legal disputes among family members, children, or other individuals who believe each has a stake in the assets “up for grabs.”


Your estate plan is unique to you

The appropriate documentation that may be signed and eventually implemented will most likely be dependent on your assets, your financial situation, and many other factors. Below is a general list of documents that are included in many estate plans.

  • Will
  • Revocable Trust
  • Financial Power of Attorney
  • Health Care Proxy
  • Living Will
  • Beneficiary Designation Forms (IRA, life insurance, 401(k), etc.)
  • Other Trusts you may have created while alive

It is important to consider that any retirement account benefits or life insurance policy proceeds will pass to the beneficiary (or beneficiaries) named on the designation forms and any assets owned jointly with rights of survivorship will pass to the surviving owner, superseding verbiage detailed in a will.


Action behind each legal doc

Will – A will is a legal document expressly relaying how the deceased person intends for property to be distributed, including naming an executor who will manage the property until its final distribution.

Revocable Trust – A revocable trust is a document that is created by a person that may be changed or altered over time. Sometimes, income may be earned and distributed by the grantor or originator of the trust. Upon the death of the grantor or originator, the property will transfer to the beneficiaries of the trust.

Durable Power of Attorney – The Durable Power of Attorney (or POA) is a legal document that grants a trusted agent the power to make and execute financial decisions on behalf of a principal agent. This power can be effective immediately or go into effect upon a condition directly impacting the principal, such as incapacitation, and the power is immediately extinguished upon the principal’s death.

Health Care Proxy – A health care proxy is a legal document which allows you to designate an individual as your agent to make any healthcare decisions on your behalf when you are not in a state to make these decisions. Appointing a health care proxy may help avoid conflict regarding medical decisions in the future.

Living Will – Many times used in combination with a health care proxy designation, a living will may be necessary for any medical decisions to be made on your behalf. A living will is a written statement that expresses, in detail, the desires of a person’s medical treatment should a circumstance arise in which you are no longer able to give informed consent.

Beneficiary Designation Forms (IRA, life insurance, 401(k), etc.) - A beneficiary designation is a legal document that instructs who will receive which asset(s) in the event of your death. Any assets that have a designated beneficiary pass via this contract and are not affected by the terms of your will. If an asset such as an IRA or 401(k) does not list any beneficiary designations at the time of your passing, it will pass via the probate process.


How do I create or update my estate plan?

Finding a qualified and experienced estate planning attorney and financial professional with whom you feel comfortable working may help guide you and your family to prepare for both the expected and unexpected. Think proactively – prepare for your introductory meeting. Organize documents and make copies so you and your new team have the same information. This will aid communication and will help the planning process move forward in a timely and orderly fashion.

It is important to regularly and frequently revisit your estate plan – you can make changes, updates, or modifications as your life progresses. Keep your plan front of mind – schedule time to revisit your estate plan every three to five years to ensure it is up-to-date and in compliance with current Federal and state laws.


PCG is here for and because of you!

PCG was founded in our desire to serve our clients, using knowledge, resources and tools to ensure that your future has all the looks and feels of your dreams. If you or someone you know would like to establish an estate plan or revise an existing estate plan, we encourage you to invite us to be a part of the conversation, and ultimately, the development. We will collaborate with you and your chosen estate attorney to create and set in motion an estate plan driven by your determinants.

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