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Mommy and Me Money: What Is an Estate Plan and Why Is It Important?

Nobody likes to think about the end of their lives, but it’s even worse to think about what would happen to our loved ones if we were to pass away early. So it’s easy to understand why a lot of parents put off making an estate plan. However, burying your head in the sand on this subject will do much more harm than good.

Even if you leave your children or beneficiaries a substantial inheritance, the last thing you want to do is to put pressure on them to make major financial decisions while they’re in the first stages of grief.

While it involves facing some uncomfortable questions and conversations, one of the best legacies you can leave is an estate plan that covers your wishes for your family and finances in the event of your passing or if you become unable to make decisions for yourself.

Below I’ll help you learn what an estate plan is (versus just a will), the components of an estate plan, and strategies for ensuring a smooth transfer of your assets to your beneficiaries so you can leave the legacy you desire. When you’re ready to get started, an estate attorney in your state can help you draft these documents and create your estate plan.

What’s an Estate Plan vs. A Will?

You might be thinking, “I have a will, so I’m good. My estate plan is covered.” If you have already taken care of a will, congratulations! You’re doing better than 60% of Americans. While creating a will is a great first step, it’s not a complete estate plan.

A will (sometimes referred to as a last will and testament) is a legal document that outlines directives for your assets once you pass away. It names beneficiaries, delineates how to distribute your property, names guardians for your minor children, and gives instructions for your last wishes regarding burial, funeral services, and so on. It also typically names an executor, the person responsible for carrying out your wishes.

An estate plan includes a will, but it also includes other documents that span both your final years of life as well as after your passing. A comprehensive estate plan helps you maximize the benefit to your heirs, protect your privacy, and avoid lengthy, costly delays in probate court.

Estate Plan Basics

An estate plan includes everything your executor and family need to know about what decisions you would make if you were making them yourself. The plan includes some or all of the following documents:

  • Will. This determines who receives what assets and who will be responsible for making that happen.

  • Revocable Living Trust. A document that allows you to transfer your assets into a trust while you are alive. The trust holds all your assets, pays your taxes, and so on, as you appoint yourself as trustee while you are alive. The successor trustee takes over the trust after you pass away. This arrangement allows your successor to bypass probate — the court process of settling your estate.

  • Durable Power of Attorney. This allows someone else to act as you, caring for assets and affairs in your name. This is especially useful in the event that you become incapacitated and unable to make financial and other decisions.

  • Healthcare Power of Attorney. This designation is independent of a power of attorney, but it is similar in function. It gives another person the power to make medical decisions on your behalf should you become incapacitated.

  • Living Will or Advance Healthcare Directives. This outlines what life-saving measures you do or do not want to be taken if you become ill or injured. For example, you can spell out in what instances and for how long you would want to be on a ventilator or a feeding tube. Do not resuscitate (DNR) orders can be outlined in a healthcare directive or independently noted in your medical record with your physician.

  • Beneficiary Designations. Certain assets can be transferred to your beneficiaries upon your passing independent of the probate process, such as retirement accounts, life insurance policies, and pensions. Naming these persons as part of your estate plan makes for a smooth transition that happens outside of court.

  • Guardianship Designations. Guardians for minor or disabled children are often listed in the will, but not always. It’s also important to include financial guardianship (if you want that person to be different from your children’s physical guardian), as well as a guardian for yourself should you become incapacitated.

  • Letter of Intent. While this isn’t a legal document, an informal letter of what you intend to happen after you’re gone can help guide your executor, family members, or — if your will is deemed invalid for any reason — a judge in taking care of things the way you would have wanted. This can include things like who should care for your pets, important information about children or disabled dependents, as well as why you chose to distribute the assets the way you did.

  • Asset Inventory. This is especially helpful for the executor as it lists what accounts you hold, where, as well as the user names and passwords required to access them. This list can also include digital assets, businesses, jewelry, sentimental objects, and other atypical assets.

Not every estate plan will need all of these documents. For example, if you have no children, you won’t need a guardianship designation, though you might consider naming a durable power of attorney for yourself. Your estate plan should be customized to your preferences, assets, and situation.

Estate Planning Strategies

Beyond determining who gets what, estate planning can employ specific strategies to maximize the amount you leave to your heirs as well as ensuring that the transition goes smoothly. With all the legal regulations around probate, wills, taxes, and the like, this involves mindful planning.

Here are a few estate planning strategies to consider when you are structuring your assets.

  • Charitable giving. Many people want to give a portion of their estate to charity after their passing. As an added bonus, charitable giving can help reduce your estate taxes. Gifting money to charity while you’re still living is another helpful tax-reducing estate planning strategy.

  • Trusts. Placing your assets in a trust gives you more control over the privacy of your asset distribution since wills are public records, but trusts are not. Trusts also facilitate a seamless transfer of assets from you to your successor. This bypasses probate court, which is costly in time and money.

There are different kinds of trusts for different assets and situations, like passing assets directly to grandchildren or removing your personal residence from your estate.

Start Navigating Your Estate Needs

Having an estate plan is important for people of all wealth levels, but it’s crucial for those with a high net worth, a business, or a complex medical or family situation. While having a will is helpful, it won’t encompass many aspects of managing your estate and last wishes. Additional documents are needed to ensure that your assets pass to your heirs as quickly and smoothly as possible, with minimal interference from probate court and taxes.

Contacting a local estate attorney might seem daunting, but I’m here to encourage you and help you navigate your estate needs (including making that important phone call!).

If you’re curious about what an estate plan would look like in your situation, book a free discovery call with AncHER. Estate planning is very customized, and together we can explore how to set up your finances to protect your legacy in the coming years.


AncHER professionals are not attorneys and this information was not written by an attorney. The content and opinions in this material are for general information only and are not intended to provide specific legal advice or recommendations for any individual.

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