Estate Planning Basics
Estate planning may sound like something reserved for the wealthy or elderly, but the truth is, everyone can benefit from having a thoughtful plan in place. At its core, estate planning is about protecting your loved ones, preserving your assets, and making sure your wishes are honored if you become incapacitated or die. Here, we’ll cover some of the basic elements of an estate plan to help you start your planning journey.
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Wills.
A will, also known as a “last will and testament,” is a legal document that spells out how your assets will be distributed after you die. In your will, you can:
- Name a personal representative (a.k.a. an executor) to carry out your wishes and handle your estate administration.
- Appoint a guardian for minor children.
- Specify who receives your property and assets.
Without a valid will, Wisconsin’s intestacy laws will dictate how your assets are distributed, which may not align with your wishes.
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Trusts.
Trusts are the Swiss Army knife of estate planning. These tools can help you manage assets during your lifetime and distribute them efficiently after death. There are several types of trusts, but at their core, a trust creates a legal entity to hold and manage assets. Trusts can provide benefits such as:
- Avoiding Probate: Assets in a properly funded trust are not subject to probate, which can save time, money, and maintain privacy.
- Asset Protection: Trusts can help shield beneficiaries from creditors and certain legal liabilities.
- Estate Tax Planning: For high-value estates, trusts can be used to minimize estate taxes.
A common type of trust is a revocable living trust, which you can change or dissolve during your lifetime. Upon your death, the trust becomes irrevocable, and the trustee (a person or institution you designate) will manage and distribute assets according to your instructions.
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Beneficiary Designations.
Beneficiary designations are an often-overlooked but critical part of estate planning. Certain assets, like life insurance policies, retirement accounts, and payable-on-death (POD) bank accounts, allow you to name beneficiaries directly. These assets will pass outside of your will or trust, making it crucial to keep your designations up to date. Regularly reviewing these designations ensures they reflect your current wishes and life circumstances (e.g., marriage, divorce, birth of children).
Most estate plans use beneficiary designations in conjunction with wills or trusts.
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Durable Power of Attorney (DPOA).
A durable power of attorney is a document that grants someone the authority to handle your financial and legal matters if you become incapacitated. This can include tasks like paying bills, managing investments, or selling property on your behalf. The term “durable” means the authority remains in effect if you become mentally incapacitated, making it an essential part of your estate plan.
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Health Care Power of Attorney (HCPOA).
A health care power of attorney allows you to designate an individual (known as a “health care agent”) to make medical decisions on your behalf if you cannot make them yourself. This document often works in conjunction with a living will or advance directive, which specifies your preferences for end-of-life care and other medical treatments.
Conclusion
Estate planning is more than just creating a few documents; it’s about peace of mind. By preparing your plan, you can ensure your loved ones are cared for and your wishes are honored. If you have questions about creating or updating your estate plan, we’re here to help guide you every step of the way.
Need more help with your estate plan? Contact our office to schedule a consultation. We’re committed to helping Wisconsin residents protect their families, assets, and future.