Components of Estate Planning

Most people who have spent a lifetime accumulating a sizeable estate have a definite interest in what happens to their assets once they are gone. In some cases individuals wish to designate their fortunes to a particular charity, while others desire to leave all of their wealth with a member of the family. Regardless of their intentions one thing is for certain; very few people are ambivalent as to the destination of their money. This interest has evolved into a financial discipline known as estate planning.

Estate planning allows people to set measures in place that will direct and protect their money in the event that they become incapacitated or deceased. This typically involves a number of common components. Let's examine a few of these tools which are generally used in estate planning.

• Wills. These are legal documents which lay out an individual's wishes for how his assets should be divided upon his death. Wills typically designate an executor to carry out the requests contained in the document. Additionally, they will appoint guardianship for minors if applicable.
• Trusts. A legal entity established by a grantor for a designated beneficiary. Assets are placed within the trust and legally controlled by a trustee until such time as they are distributed to the beneficiary. The trustee makes decisions based on a specified pre-arranged agreement and works in the best interest of the beneficiaries. If this entity is created during the grantor's lifetime it is termed a living trust. These trusts can be funded as soon as the agreement states. Other trusts are not created until the death of the grantor.
• Powers of attorney. An individual conveys legal rights upon another to make decisions on his behalf in the event of an incapacitating disability.
• Specialized lawyers. These specially trained professionals are the individuals who craft the wills, trusts, and powers of attorney. The documentation can become so detailed and the applicable laws so tricky that the majority of (sizeable) estate planning could not be accomplished without them. As a result, these lawyers are probably the most important component of the entire process.

Estate planning is critically important for those individuals who wish to have an input on what happens to their assets once they are disabled or deceased. The first step in this procedure is to obtain a better understanding of what the individual components of the process are and how they function. This will enable people to implement plans which are very effective at achieving their goals.

This website provides only a general overview of estate planning. You should consult an attorney, or perhaps a CPA or tax advisor for additional guidance.

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