Estate Planning BasicsEstate Planning Basics: A Beginner’s Guide

Many people think that estate planning is too expensive for them or they do not have enough money to need one. Many more put it off because they do not like contemplating their own mortality. No matter your situation in life, estate planning is a vital component. This article is a guide to estate planning basics. It will go over the definition of estate planning, who needs it, what makes up an estate plan, and much more.

What is Estate Planning?

Basically, estate planning is the process of preparing your affairs upon your death or incapacitation. It allows you to name trusted individuals who can make decisions for you if you are unable to. It also lets you name someone to distribute and manage your property after you pass. Most importantly, you are able to name the people that you want your assets to pass to. A proper plan can even help your estate to avoid probate. For a proper plan to be made it essential that people are educating themselves as well as using an estate planning specialist to make sure everything is official and above board.

Who Needs an Estate Plan?

It is a common misconception that estate planning is only necessary for those who have a lot of money. In reality, every adult should have some sort of plan in place. Estate planning becomes even more important when you own any type of property, especially if those assets are in more than one state. Those with dependents should also make sure to have a plan in place, as well as small business owners.

Goals Accomplished by Estate Planning

Whatever your situation may be, there are many different goals your estate plan can accomplish. It is important that you clearly have your goals in mind before you start the estate planning process. Here are a few examples of goals you may have:

  • Avoid confusion about your final wishes
  • Protect loved ones by ensuring they receive your assets
  • Reduce conflict amount your surviving family
  • Minimize taxes and legal expenses
  • Preserve your wealth for your beneficiaries
  • Ensure the protection of your minor children
  • Provide for family members with special needs
  • Protect your beneficiaries’ assets from bankruptcy, divorce, and creditors

Basic Estate Planning Terms

An integral part of estate planning basics is understanding some of the fundamental terms. This will help you to better understand how it works and what type of documents you may need.

  • Estate: This is all of the property that you own, as well as any liabilities you have incurred.
  • Grantor: The person who transfers property into the trust they created.
  • Beneficiary: The person, or people, who are to inherit the grantor’s property.
  • Trustee: Person who manages the property in the trust. It can be the same person as the grantor.
  • Successor Trustee: This is the person who takes over the duties of the original trustee. They will administer the property to the beneficiaries according to the provisions of the trust.
  • Probate: This is the court guided process that identifies your heirs and transfers your property into their names.
  • Agent: An agent is the trusted person you name to make financial and/or healthcare decisions for you if you are incapacitated.


Estate Planning Documents

There are many different documents that can make up an estate plan. The documents that make up your estate plan will depend on your situation and goals. Below you will find a list of the most common estate planning documents, along with an overview of what they accomplish.

  • Last Will and Testament: A Will is the most well know estate planning documents. It is a probate document, it will guide the court with regards to who your beneficiaries are and who to distribute to them. Additionally, it is very important to understand that a Will does not help you to avoid probate. This is a very common misconception.
  • Revocable Living Trust. A trust allows you to name your beneficiaries and how you want your assets to be distributed to them. The main advantage of a living trust is that it allows you to avoid probate. Also, it keeps your affairs private.
  • Financial Durable Power of Attorney: This document allows you to name an agent to take care of your financial affairs if you are unable. This would include giving them the ability to pay your bills.
  • Healthcare Power of Attorney: With this document, you can name someone to make healthcare decisions if you are incapacitated.
  • Living Will: A living will is a document that allows you to state how you wish to be treated when you are nearing the end of your life or you are in a persistent vegetative state.
  • Mental Healthcare Power of Attorney: This document gives you the ability to name an agent to make mental health care decisions for you if you are incapacitated.

Starting the Process

Now that you understand some of the estate planning basics you may be wondering where you should start. The best thing you can do is meet with a profession. In Arizona, that could be an Attorney or a Certified Legal Document Preparer. Which one you choose will depend on the complexity of your situation and the level of legal advice that you desire. Whichever you choose to use, you will still need to prepare for your initial appointment. Typically, you will need to have in mind the goals and objectives you want your plan to accomplish, the names of your family and beneficiaries, any concerns you may have about your beneficiaries, a list of your assets, and the names and addresses of your trustees and agents.

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