The 6 Tools of Estate Planning

Too often, wills and trusts are seen as the magic wand of estate planning. 

But no one tool can turn your pumpkin into a carriage (at least not for long). Instead, several tools work together to help make your estate plan the bell of the ball. Let’s take a look.

Your Estate Planning Toolbox

Building a proper estate plan can’t be done without the right tools. We’ve divided your toolbag into three sections: the foundation, the principal vehicles, and the designations. Review the information below carefully as you start to piece together your estate plan with the proper tools for the job.

Tools #1 & #2: Power of Attorney and Patient Advocate

Starting with the foundation of any estate plan, you’ll need to determine your Power of Attorney (PoA) and Patient Advocate (PA). Both designations plan an integral part in protecting your well-being, as they will allow someone to make decisions on your behalf should you become incapacitated.

The person (or people) you choose to be your PoA should have your best interest at heart, and they must be capable of making important decisions regarding your finances, assets, and medical care.

Power of Attorney

A Power of Attorney is a legally binding document that gives another person the power to act on your behalf. This person, known as your agent, can be your decision-maker when you’re incapable of making decisions yourself.

A PoA must be signed and executed while you are still of sound mind and body, making it an important foundational component of your estate plan. You don’t want to put off creating a PoA until something happens to you, as it may not be legally binding.

It’s important to note that your PoA will be considered null and void upon your passing. For estate planning purposes, this document is typically designed to assist in the event you are incapacitated.

Patient Advocate

A Patient Advocate is someone who will dictate medical decisions on your behalf. This person can serve as a singular point-of-contact while helping to manage your medical treatment. Essentially, this appointment gives you a voice by empowering someone you trust to speak for you.

Oftentimes, this person may be a family member or trusted friend. You may have the option to hire a professional Patient Advocate as well. Weigh your options carefully, as this person will play an essential role in the event of a medical emergency.

Tools #3 & #4: Will and Trust

A will and a trust are two vehicles that can help you effectively execute your final wishes. You may find that one benefits your situation better than the other, or a mix of both are needed to fully address your estate planning intents.

Will

A will issues an administrative process for the courts via probate to honor your intent. The more preparation you can do ahead of time, the easier it is to avoid a costly and lengthy probate process for your heirs.

Simply put, probate is the legal process necessary to pass the assets of a deceased person on to others. Depending on your state, it may be possible to avoid probate altogether—although this tends to be the exception, not the rule.

Trusts

A trust allows a third-party or person, known as a trustee, to access and direct assets after your passing.

Similar to wills, a trust can initiate the administrative process. A trust, however, can do so without putting your estate through probate. Because of this, beneficiaries may be able to access their inheritance sooner.

Trusts aren’t a blanket solution, but combining them with other tools can help maximize efficiency while reducing future tax obligations on your estate and heirs.

Tools #5 & #6: Joint Ownership and Beneficiaries

Two designations that can help maximize your legacy planning strategy are joint ownership and beneficiaries.

Both of these designations actually have the power to supersede what’s in your will, making them effective tools in your estate planning toolbox.

Joint Ownership

If someone is a joint owner on an account, they can access the account and its funds immediately after your passing. This designation would bypass probate, as the account is already in the inheritor or executor’s name.

Joint ownership shouldn’t be overlooked, as it can help your executor cover immediate costs like funeral expenses and legal fees.

Beneficiaries

Unlike a joint owner, a beneficiary cannot access or control funds in the owner’s account until after the owner’s passing. You can have as many beneficiaries as you’d like, and you can outline who gets how much during the estate planning process.

You’ll want to work with your financial advisor when selecting beneficiaries for specific accounts. There may be significant tax benefits to choosing your spouse as a beneficiary on things like your retirement accounts and life insurance policies.

A non-spousal beneficiary of an IRA, for example, may face certain tax obligations that a spouse wouldn’t.

Bonus Tool #7: Legacy Wealth Advisors

A trusted financial professional may be the most important of all the tools in your estate planning toolbox. With proper planning in place, you can protect your assets and your loved ones from excess taxes, costly legal fees, and emotional turmoil.

Legacy Wealth Advisors helps individuals and families navigate the legacy planning process from start to finish. If you’re looking to build out your custom estate planning toolkit, reach out and set up a 15-minute call with us today.