The sum total of a person’s belongings, property, money, and assets is generally referred to as their estate. An estate plan is a comprehensive strategy for managing and passing on these assets, insurance, and health directives. 

In particular, there should be plans regarding how the estate will be divided and distributed to recipients when the estate owner passes away. Individuals, families, and couples who want to think ahead for the future will create typically an estate plan so that different pieces of their net wealth can be managed as part of a unified whole.

Is an Estate Plan Different from a Will?

A will is a legal document created when an individual is alive. This document specifies who should inherit any assets or material objects upon their death. Usually, a comprehensive estate plan will include a will as part of the entire plan. 

However, an estate plan is also likely to include other financial management instruments, such as a trust or multiple trusts that can take effect while the person is still alive. Ultimately, an estate plan can be more varied and unique to each individual based on their assets and needs. So an estate plan is far more comprehensive, if the individual requires it. 

How Do I Create an Estate Plan?

Creating an estate plan will involve identifying tallying up all the different pieces of a person’s individual wealth. This may include property owned, stocks, holdings, cash, savings, insurance policies, and health issues. People with disabilities or disabled beneficiaries may need to create specific estate plans to meet their needs.

Many people draft a will to begin the overall process of creating an estate plan. This is typically the main legal instrument that contains their instructions and preferences for the distribution of their estate. 

Next, it is necessary to consider any assets they want to leave in trust and establish a trust for those assets. Trusts are established by a grantor (the estate owner), who assigns trustees and beneficiaries, as well as guidelines for the trust, and then moves wealth and gifts into the trust. The trustee is the person tasked with managing the property, while the beneficiary is the person who will ultimately receive the property.

Trusts can sometimes be useful for transferring property to recipients before the estate owner passes away. This can have several benefits depending on the type of property and the type of trust involved. For instance, certain taxes can be avoided, and trust property transfers can make the overall estate distribution process simpler when the person passes away.

What Else is Needed to Create an Estate Plan?

An estate plan will need a power of attorney to be designated in the event that the owners of the estate are no longer able to manage their affairs. A power of attorney allows the estate owner to designate another person (an “agent”), who can make legal decisions on their behalf. 

Also, a set of health care instructions should be included as part of the estate plan. The person creating the estate plan must decide if they want the same person or persons managing their health care and financial matters, or if they would like to designate different parties.

Next, the person creating their estate plan will need to establish insurance policies, especially estate planning life insurance. Life insurance often covers the payment of debt or estate tax after the person passes away. 

Calculating potential taxes that the federal government could collect after death is necessary to select the right policy that will cover all expenses, including funeral expenses. It is also a good idea to insure any businesses or business ventures.

Finally, an estate planning lawyer can advise you on how to store the documents of your estate plan so that they are safe and accessible to those who need them.

What are Some Factors Should I Consider When Creating an Estate Plan?

When creating an estate plan, it is useful to broadly consider various factors that might affect the distribution of your estate. Each estate is different, as each person will own different assets and property, and will have differing amounts of financial savings. 

Some factors that you should consider when creating your estate plan may include:

  • Who Will Receive Your Property: You should consider who you want the beneficiaries to be when you pass away. Beneficiaries are the persons who will receive portions of property and assets. In most cases, this will include close family members like a spouse, children, and siblings. It can also include friends, more distant relatives, and even business associates. These should be stated clearly (usually in the will document) so as to avoid any disputes or conflicts;
  • The Type of Property Involved: You should look closely at all the different types of property, assets, and bank account funds you own. This can influence the way that your estate property is divided up. For instance, you may want a certain family member to receive real property (such as a home), while you may want other family members to receive your stocks and security assets. This all depends entirely on your personal preferences and desires; and
  • The Local State Law Regarding Wills, Trusts, and Estates: Estate planning laws will vary by state. These may have effects on the way you can distribute and allocate your estate property. If you have any questions regarding the specific estate laws in your area, you should contact an attorney.

Do I Need a Lawyer for Help Creating an Estate Plan?

Estate planning is a very complex process that can involve many different pieces and parts, as well as many different parties. It is important to work with a wills, trusts, and estates lawyer in your area to make sure everything is working together and established legally during the planning process.