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What Is Estate Planning?

Updated: Feb 9, 2022

Do I Have an Estate?

Yes, Your estate is comprised of everything you own— your car, home, other real estate, checking and savings accounts, sock shares and investments, life insurance, furniture, personal possessions, and businesses. No matter how large or how modest, everyone has an estate.


What Is Estate Planning?

Estate planning is the preparation of tasks that serve to manage an individual's asset base in the event of their incapacitation or death. The planning includes the bequest of assets to heirs and the settlement of estate taxes. Most estate plans are set up with the help of an attorney experienced in estate law.


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Planning tasks include making a will, setting up trusts and/or making charitable donations to limit estate taxes, naming an executor and beneficiaries, and setting up funeral arrangements. The most basic step in estate planning

involves writing a will. Other major estate planning tasks include the following:


  • Limiting estate taxes by setting up trust accounts in the names of beneficiaries

  • Establishing a guardian for living dependents

  • Naming an executor of the estate to oversee the terms of the will

  • Creating or updating beneficiaries on plans such as life insurance, IRAs, and 401(k)s

  • Setting up funeral arrangements

  • Establishing annual gifting to qualified charitable and non-profit organizations to reduce the taxable estate

  • Setting up a durable power of attorney (POA) to direct other assets and investments

Using Life Insurance in Estate Planning

Life insurance serves as a source to pay death taxes and expenses, fund business buy-sell agreements, and fund retirement plans. If sufficient insurance proceeds are available and the policies are properly structured, any income tax on the deemed dispositions of assets following the death of an individual can be paid without resorting to the sale of assets.

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*PERSONAL & FAMILY HISTORY

*DURABLE POWER OF ATTORNEY

*ADVANCED HEALTH CARE DIRECTIVES/PROXIES

*WILLS

*TRUSTS

*DEEDS *FINANCIAL-ASSETS

*BANK STATEMENTS

*BROKERAGE ACCOUNT STATEMENTS

*FINANCIAL-LIABILITIES

*INSURANCE

*CORPORATE/PARTNERSHIP AGREEMENTS

*TAX RETURNS (always keep the last 5 years)

*GIFT TAX TRANSFERS

*PERSONAL PROPERTY TRANSFERS

*FUNERAL ARRANGEMENTS

*IMPORTANT DOCUMENTS LOCATOR

*MISCELLANEOUS


Sources: Investopedia

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