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Estate Planning Tools That Every Person Should Know About

Estate Planning Documents

The first tool we’ll introduce is the concept of the estate planning document. Proper documentation is a necessary part of estate planning – it’s what makes your plan legally binding. You’ve likely heard the terms “Trust” and “Will” before. These documents or the basic building blocks of estate planning, and it’s important to know the variations of each. Be sure to verse yourself with the following types of estate planning documents:



A trust is a legally-binding document that serves as a holding place of your assets. Various assets that you own, such as cash, real estate, or other belongings, can be placed under ownership of your trust. Upon your eventual passing, these assets will be transferred from your trust to your beneficiary or beneficiaries. Your beneficiary could be a loved one, such a spouse or a child, or it could even be a charity of your choosing.



Trusts and Wills go hand-in-hand. A will is another legally-binding document that specifies how your assets placed in your trust above will be distributed. It can detail who will be inheriting which asset, including how much, the frequency, when, as well as other conditions that you would like to be met. For example, let’s say you have a fund set up for your child. If you were to pass away, you don’t want this fund to be accessible to your child immediately. Instead, you want a small percentage distributed to your child on a monthly basis, after they’ve reached a certain age. All of these conditions and requirements would be documented in your will.


Living Will

A living will is also referred to as an advanced directive. It comes into play in the rare case that you were to become incapacitated. This means that although you are still alive, you are no longer able to move, speak, or make your own decisions. Through the will, your loved ones will understand how to fulfill your wishes. This can include desired treatments or specific directives if certain medical circumstances were to happen. A living will helps your loved ones feel confident that they are making the right decision on your behalf.


Living Trust

Much like the living will, a living trust is a trust that is active while you’re still alive. Instead, you’ll maintain control over the trust and have access to all of your property and assets. However, the trust will then oversee the process of transferring these assets to your beneficiaries, in a legally-controlled environment. Going along with the example used previously, you can set up your living trust so that your child will receive money each month once they turn into an adult, regardless of whether or not you are alive.


Last Will and Testament

A last will and testament is a legally-binding document that names the executor of your estate plan. This is usually an individual that you trust, who is put in charge of making sure that your final will is executed as planned.


Estate Planning Personnel – Powers of Attorney

Along with your estate planning documentation, consider adding personnel to your estate planning team. What does this mean, and why would someone need personnel? An estate plan includes legally-binding documents, but you’ll need some trustworthy people to make sure things get properly executed when you’re no longer able to. This is where your powers of attorney come in.

A financial power of attorney is someone who will make sure that your trust and will are carried out as you wish. In case there are any blind spots in your estate plan, this person is also in charge of making financial decisions on your behalf.  You can also appoint a medical power of attorney in your estate plan. This is the person who would carry out the directives you implemented in your living will. This empowers them to make healthcare decisions on your behalf, such as whether or not to administer certain drugs, or whether you should remain on life support.

As you might imagine, you’ll want to appoint powers of attorney that you can trust without any hesitation. Although highly personal, appointing the right power of attorney can be tricky. To put frankly, it can even become a political decision when family dynamics are involved. We often see individuals furrowing their brows, trying to find a balance between finding the most diplomatic option while serving their own needs. This is because although your estate plan is about you, the people it really affects are your loved ones. We urge you not to rush this step, and know that it is okay to change who you name your power of attorney throughout your life.


Estate Planning Software

Estate planning software is now widely available as SaaS (Software-as-a-service) platforms, which now helps individuals create an estate plan more easily than ever before. Users can easily navigate the estate planning process by following prompts. Online fillable forms are provided so that legal documents, such as trusts and wills, can be created from the comfort of your own home. These sites also offer online education and articles so that you can get a good understanding of what you’re doing. Further, these estate planning software services also provide a secured portal, through which you can easily upload and manage documents. Knowing your options and being aware of tools is the best way for you to create an effective estate plan that maximizes benefits for your loved ones. The top three tools that you should know for starters are estate planning documents, powers of attorney, and estate planning software. As mentioned, software has made estate planning easy, painless and affordable. That’s why you have less and less of an excuse if you haven’t established an estate plan already.

Why Is Estate Planning Important?

Creating an estate plan often brings up visions of the ultra-wealthy battling over inheritances and business interests. But in reality, every adult needs a solid plan in place as to what should happen to their children and assets after they die. No matter what your current financial situation may be, using the right estate planning tools makes a huge difference in making sure your final wishes are met. A solid plan can also make life (and taxes) much easier for the people you care most about. In this article, learn all of the reasons why estate planning is important not just for you and your assets, but for those loved ones you leave behind when you die.


Estate Planning Protects Beneficiaries

Estate planning is the process of organizing your personal and financial affairs to deal with the possibility of future mental incapacity or death. One of the key elements of estate planning is leaving your heirs with easy access to the assets you wish to pass on to them.  There are a number of estate planning tools and resources you can use depending on your financial situation. A life insurance policy, for instance, quickly provides your beneficiary with a death benefit after you pass away (and they file a claim). The proceeds of a policy can help cover things like final expenses, mortgage payments, and future college tuition for kids or grandkids.

Prioritizing a Guardian for Minor Children

Creating a strong estate plan includes naming a guardian for children who are under 18 years old. If you have children and don’t complete this task, the court will be in charge of choosing a guardian for your kids. In the short term, your child may not have someone you know to stay with.  “The minor child might be with Child Protective Services in a temporary foster care situation and they may stay there until a more permanent guardian is found.” In this case, a circuit court judge within the state in which the child lives then appoints a guardian for the child.

Estate Planning Protects Your Assets

Without a will and other estate planning resources in place, your assets will be distributed based on the law of the state where you live. Each state has its own set of laws. Generally, though, the recipients of your assets are your spouse and your bloodline, but things can quickly become complicated.

In Utah, for instance, the first priority of distribution gives one-third of an individual’s assets to their surviving spouse, and the remaining two-thirds is divided evenly among any children and the children’s descendants. But if you want all of your assets to go to your spouse so they can comfortably retire, you would need to clarify those wishes in a will.

Going Through Probate

When planning your estate, consider the probate process, especially if you want your beneficiaries to quickly access your assets. Not all states require probate, and it can be a very complicated process. Utah for instance, does not require any accounts with named beneficiaries to go through the probate process, including life insurance and retirement accounts. The probate process can also be very costly, especially if it takes a long time to settle the estate. It includes appraisal costs, executor’s fees, legal and accounting fees, and more, often totaling anywhere from 4% to 7% of the total estate value. And if someone contests the will, there could be thousands of dollars of litigation costs.

Factors To Consider


  1. Living versus Testamentary: The first issue to consider is whether you feel the need to give your trust a trial run while you are alive. Many people are finding that they prefer to establish the a living trust now so they can see firsthand how it is working and make sure that if there are any modifications necessary, they can handle them while they are alive. If you use a testamentary trust, you will not be around to check how well it is working. But if you have some needs that are based on minor children, your trust may not need to be established if you live long enough to have your children reach the age of majority, so a testamentary trust may be advisable here.
  2. Trustees: For a living trust, you can be your own trustee while you are alive and healthy. Your successor trustees or alternate trustees will only need to take over if you become physically or mentally incompetent or pass away. Make sure that your trustee selections are individuals that are caring, trustworthy and financially knowledgeable. In most cases it is also a good idea to nominate trustees that are younger that yourself, for obvious reason.
  3. Trust Funding: A trust can be in existence, but it really is ineffective until it is funded. By funded, we mean that you have your assets placed into the trust or changed to the trust ownership. The funding process can take some time, but make every effort to start with your largest assets first and then work your way down to the smaller ones. Make a complete list of assets and take them one by one until you are finished.
  4. Beneficiary Provisions: With a living trust, it remains revocable as long as you are alive, unless you have chosen otherwise. But upon your death or with testamentary trusts, which are irrevocable, the beneficiary provisions cannot be changed because you are no longer around to do it. So make sure that you review your beneficiary provisions regularly to make sure that they are exactly as you wish and make any changes promptly in order to ensure that your wishes are carried out.
  5. Trust Dissolution: Selecting a date or event that will allow your trust to dissolve and make any final distributions to your beneficiaries is usually a good idea. If you want to have the trust take care of your children until the youngest turns age 30 or until the death of your last child, you can spell out these provisions of dissolution. If you have a child or family member with special needs, you can also establish some event that would terminate their special needs as an additional dissolution event.
  6. Cost Comparisons: As with any estate planning document, preparation and administration costs should always be part of your analysis. Setting up a testamentary trust as part of your Last Will and Testament is relatively inexpensive. A living trust can cost thousands to set up initially, but a testamentary trust may cost even more after you are gone. While you are alive, you can interview the attorney and negotiate a fair price, but after you are gone, if the trust is necessary, it has to be done.

An Estate Plan Can Provide Tax Relief

The federal government charges an estate tax once your estate is valued at a certain amount. In 2022, you are required to file an estate tax if the estate exceeds $12.06 million. If your assets will likely be above that limit, you might consider some advanced estate planning strategies to reduce the impact of taxes.

An irrevocable trust—a special trust that serves as both owner and beneficiary of one or more life insurance policies—for instance, is not subject to estate taxes. You can’t change the contents or the beneficiary once it’s finalized, but you can ensure that the trust is excluded when your estate is calculated. You can also make lifetime gifts as part of your estate planning, which are not included as part of your taxable estate.8 In 2022, each individual may make an annual gift to another person of up to $16,000 without paying any taxes. This could be an effective way to spend down your assets later in life by making annual gifts to children, siblings, or friends.


Estate Plans Simplify Things for Your Family

Without a will and other directives in place when you die, you may inadvertently stir up hard conversations between family members. And it’s not always about money. “There are a lot of emotions involved.” “Families may fight over small items and can go to court over it, even common items with sentimental value.”  This is especially important with blended families, which may include ex-spouses, new spouses, biological children, and stepchildren. Since each state has its own process for determining heirs, not having a will may cause you to unwittingly exclude someone you care about who isn’t a blood relative or include relatives you don’t actually want to inherit anything.  The same holds true if you have a life partner but are not married. If that person is not listed as your beneficiary, your assets are likely to be distributed to your closest relation instead.


Steps To Creating An Estate Plan

Here are the steps to creating and maintaining an estate plan:

  1. Make your medical decisions: This includes deciding when and if you will move into a nursing home, how much and what kind of care you wish to receive, and who can make medical decisions for you if you are incapacitated.
  2. Choose a trusted person: You’ll need to choose the person, known as a healthcare proxy, who will make medical decisions if you’re unable to do so. You’ll also want to designate someone as power of attorney to manage your financial affairs and property if you can no longer do so. This person is often a child or spouse, but it can be anyone you choose.
  3. Update your paperwork: Make sure the beneficiaries on any life insurance policies and retirement accounts are updated. Beneficiary designations supersede your will instructions. That means that even if you leave all your assets to someone in your will, the person listed as the beneficiary will receive the policy or retirement account. You don’t want a death benefit to go to an ex-spouse because the forms were never updated.
  4. Value your assets: Put together a personal balance sheet that includes real estate, stock, bank balances, vehicles, collectibles, and all liabilities. Keep these values updated. If you set up a trust and then accumulate new assets, you could add years to the process.
  5. Decide how the assets will be divided: Unless you set up an irrevocable trust, these decisions can be changed. After you do this, make your bank account payable on death. This will make it so the money avoids probate and goes directly to the beneficiary.
  6. Make a succession plan for your business: If you own and run a business, you probably have an idea how difficult it would be to adjust operations if you weren’t there. Put a plan together for future ownership and who will manage the company.
  7. Engage an attorney: No matter what size your estate is, you’ll benefit from working with a professional. You can also disregard the order of this list if you’re having problems and engage an attorney for help at any time.
  8. Decide what type of life insurance and long-term care insurance you need: Life insurance will support your dependents, and long-term care insurance can save your assets from being used to reimburse Medicaid.


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