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What is Estate Planning?

Estate planning is the process of legally making a plan for the management of your assets while you are alive and the disposal of your assets after death. A good estate plan also consists of much more - including naming guardians for minor children, creating health directives in the event of incapacity and planning to minimize fees and taxes paid upon the transfer of your property.

Many people put off estate planning because they think they don’t own enough, they think they’re not old enough, or they just don’t want to think about it. Then, when something happens to them, their families are left to pick up the pieces. Estate planning is not just for the super wealthy or individuals in their eighties - it's for everyone.

What is an “estate”?

Your “estate” consists of all property owned by you, including:

  • Bank accounts

  • Stocks and bonds

  • 401Ks, IRAs and other retirement plans

  • Life insurance and annuities

  • Real estate

  • Personal property, such as jewelry, cars and artwork

  • Business interests

If you don’t have an estate plan in place, North Carolina has one for you – and you may not like it.

If you are incapacitated, no one can access or control assets in your sole name, not even your spouse. And this is true even for some joint assets, like your house, where both parties need to sign off to transact business. In order to get control over your assets to use them for your care, someone will have to be appointed by the court as your guardian. This is an expensive and time-consuming process, not to mention emotionally difficult for your family.

At your death, your assets will be distributed in accordance with state law. If you’re married with children, your spouse and children will each receive a share. If those children are minors, a court guardianship will be necessary to obtain control of their funds - their surviving parent cannot automatically manage them. The use of these funds is limited by the court and your children will receive the balance at age 18, which is generally not the best time for someone to inherit a large amount of money.

Why is estate planning important?

When you prepare an estate plan, you control who will manage your assets and make health care decisions for you if you are unable to do so. You also control who receives what and when at your death, and who should be in charge of making sure your wishes are carried out. If you have young children, you also control who would raise them. Wouldn’t you prefer to make these decisions instead of having them made for you?

What are the basic documents that make up an estate plan?

An estate plan should include the following documents:

  • A Will, which provides who receives your assets and when. It also names someone to be in charge of your estate (your Executor) and can name guardians for minor or incompetent children.

  • A Power of Attorney, which names someone to manage your financial affairs if you are unable to do so.

  • A Health Care Power of Attorney, which authorizes someone to make medical decisions on your behalf if you are incapacitated.

  • A HIPAA Authorization, which gives the individuals named the power to access your medical information and talk to your medical providers.

  • A Living Will, which is a statement of your wishes for the kind of life prolonging measures you want, or don’t want, in an end of life situation.

An estate plan may also include a Revocable Trust, which allows for easier management of your assets in the event of incapacity and at your death, minimizes court fees and attorney fees at death, and keeps the size of your estate and who receives your assets private.

Beneficiary designations for retirement plans, annuities and life insurance are also an important part of your estate plan. These designations override your estate planning documents. For example, if your Will leaves all of your assets to your wife, but the beneficiary of your life insurance policy is your mother, the life insurance proceeds will pass to your mother. That’s why it’s important to make sure that your beneficiary designations are consistent with the terms of your Will and/or Trust.

How do I start?

An estate planning attorney can help guide you through the estate planning process. After discussing your family situation, assets and goals, an estate planning attorney can advise you on the documents and options that make the most sense for your specific situation, and then help you implement that plan.

A properly prepared estate plan gives you the control, and most importantly, will give you and your family peace of mind.

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