By: Rachel Poe
Estate planning can sometimes come across as a section of planning that is completed later in life after retirement has begun and “it’s time” to start thinking of life’s next stage. Au contraire, estate planning is a part of one’s portfolio that deserves equal attention pre and post the date of retirement. The time is now! As net worth, investments, personal property, real estate, relationships, and other intrinsic items change in status, value, and possession over the years, it is important to consistently update (or begin creating) your estate planning documents.
According to caring.com 2019 Will and Living Trust Survey, considering individuals between 35-54, more than 60% of people do not have wills. Out of individuals 65+, about 35% are without a will. The top two reasons why people do not have a will is “I just haven't gotten around to it” and “I don't have enough assets to leave to anyone.”
Below are some introductory terms for those stepping into the estate planning process
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Estate Planning - the arranging for disposition and management of someone's estate at death through the use of wills, trusts, insurance policies, and other devices.
Estate Tax - a tax levied on the net value of the estate that amounts above the minimum threshold by the state of a deceased person before distribution to the heirs. This is important to consider and plan for throughout the estate process!
Will - Aka Last Will and Testament - A legal declaration of a person’s wishes regarding the disposal of his or her property or estate after death
Living Will - a written statement detailing a person’s desires regarding their medical treatment in circumstances in which they are no longer able to express informed consent, especially an advance directive.
Executor - a person who is responsible for making sure all assets within the will are accounted for. In addition, this person is responsible for transferring these assets to the appropriate party as designated by the deceased.
Beneficiary - the person designated to receive the income of an estate that is subject to a trust; a person to receive proceeds or benefits. Beneficiaries are typically assigned within life insurance policies, retirement assets (401K, IRA), investments, real estate bank/brokerage accounts, etc.
Power of Attorney - a legal instrument authorizing one to act as the attorney or agent of the grantor. This usually includes decisions regarding health care management. Hospitals and other third parties use POA to legally carry out decisions made by the appointed agent.
Trusts - an arrangement whereby a person (trustee) holds property as its nominal owner for the good of one or more beneficiaries. A Living Trust can be open prior to or post death for a trustee.
Revocable Trust- A living trust that can be changed
Irrevocable Trust- A living trust that can rarely be changed
Testamentary Trust- Established after the death of the grantor through the will
Probate - the official proving of a will; the will is reviewed to determine validity.
According to Investopedia.com, probate also refers to the general administering of a deceased person’s will or the estate of a deceased person without a will.
Guardianship - a person who is appointed to obtain custody of a minor child, protect the child's emotional and financial well-being, provide growth and protection to the child, and maintain assets left in their name.
Financial literacy around some of these specialized planning topics can be muddy and overwhelming. It is important to partner with a planner and attorney who you can be transparent with, share experience, and build trust. Here at Rooted Planning Group, both our Nourish and Deepen program allows us to review a few basic estate planning documents to prepare for your estate planning attorney’s needs. We communicate with your attorney while continuing to share and educate the power of planning with you. It is our desire to break down the process and help you feel confident with your future.
While it may seem uncomfortable to plan for death while alive, strategic planning while living will ensure that the legacy you have built during your lifetime will pass to those you value.