Understanding estate planning and

how to create an estate plan that works for you

Estate Planning

What is Estate Planning?

Estate planning is the process of organizing your financial affairs so your assets can be distributed according to your wishes upon your death. It also involves things like making arrangements for the care of minor children as well as the management of your finances if you become incapacitated. What is estate planning? It’s a vital part of financial planning, but it is often overlooked because of how complex and emotionally challenging it can be.

Estate Plans – Not Just For the Wealthy

Estate plans are not just for the wealthy. Everyone can benefit from having a plan in place. If you have assets, such as a home, retirement account, or even a life insurance policy, you need to consider how those assets will be distributed should something happen to you.

Death is not the only reason to have an estate plan. If for some reason you were to become incapacitated you need someone to make financial and medical decisions on your behalf. Without a plan in place, your family will have to go to court to get the authority to make those decisions, which can often be costly and time-consuming.

Protecting Your Family

Creating a will is a vital part of an estate plan. Only about 33% of people say they have a will, according to the 2021 Estate Planning and Wills Study that surveyed 2,500 Americans, published by Caring.com. Of those who don’t have a will, 34% say it’s because they haven’t gotten around to it.

Having a will is critical because, without one probate, the legal process of distributing your assets after you die can be lengthy and expensive. If you’re looking to avoid probate, having a will not only ensures you don’t have to go through the messy parts of the probate process it will aid in ensuring your assets and personal possessions will be distributed according to your wishes as outlined in that document. However, if you don’t have a will, your assets will be distributed according to state law. This can often result in your assets being distributed in ways you may not have intended.

Don’t Forget About Taxes

A taxable estate is the total value of a deceased person’s assets that are subject to taxation. Depending on how much money you have and where you live, minimizing your overall tax liability is an important consideration in estate planning.

Consider bringing in a professional like a CPA to help you with tax planning and financial decisions. They might recommend you implement a revocable trust or provide instructions on what you can do to ensure your money and your assets are protected and distributed in a way that benefits your beneficiaries.

Some states, for example, have estate taxes, but at a federal level as of 2022 only very large estates are subject to estate taxes. In 2022, up to $12.06 million is exempt.

Inheritance taxes can also play a role depending on the state in which you live. In this article, you can learn more about inheritance taxes and what states impose them. Having a financial professional on your side can prevent the estate planning process from feeling too overwhelming. They can answer questions about the estate tax, inheritance tax and plan for future life events.

Taxes play an important role in estate planning - Kaizen Wealth Management

Taxes play an important role in estate planning – Kaizen Wealth Management

Consider a Trust

As mentioned above, having a trust might be something a financial professional may recommend for you depending on you and your family situation. Living trusts are flexible and can be used to accomplish a variety of estate planning goals.

According to NerdWallet.com, a trust can “allow you to designate portions of your estate to go toward certain things while you’re alive. If you become ill or incapacitated, your selected trustee can take over. Upon your death, the trust assets transfer to your designated beneficiaries, bypassing probate, which is the court process that may otherwise distribute your property. There’s also the option to set up an irrevocable trust, which can’t be changed or revoked by the creator.”

Long-Term Care Planning and Life Insurance

As we age, there is an increasing likelihood that we will need some type of long-term care due to declining health or disability. Long-term care costs can quickly deplete savings accounts and other financial resources—leaving nothing for a surviving spouse or other family members after we’re gone.

Long-term care insurance can help prevent this by providing funds specifically earmarked for long-term care expenses—protecting other assets in our estates.

When making financial plans for the future, life insurance is often an important consideration. While it may not seem like a pressing concern, purchasing life insurance can bring peace of mind knowing that your loved ones will be financially protected in the event of your unexpected death. Life insurance helps to cover expenses such as funeral costs, mortgages or debts, and even daily expenses for surviving family members.

It can also provide funds for children’s education or allow a stay-at-home parent to continue staying at home. With life insurance, you can ensure that your loved ones are taken care of and have the resources they need to move forward after your passing. It may be a difficult topic to think about, but life insurance provides valuable security for both you and your family’s future.

Creating a will and designating power of attorney during estate planning - Kaizen Wealth

Creating a will and designating power of attorney during estate planning – Kaizen Wealth

Power of Attorney

Power of attorney is an important part of estate planning, allowing someone to make financial or medical decisions on your behalf if you become unable to do so yourself. This can be particularly crucial for families, as it allows for a smooth transition if a family member becomes incapacitated or passes away. Who can you choose to become a power of attorney?

Some people choose a spouse or another family member, while others select a close friend or financial advisor. It’s important to choose someone you trust implicitly and who you know will make decisions in your best interests.

Power of attorney can also be used to assist with managing assets during a person’s lifetime, simplifying tasks such as managing bank accounts or selling property. It’s important to carefully choose your power of attorney, as this person will have significant control over your affairs. Make sure to discuss your wishes and continuously update your power of attorney designation as needed. Including power of attorney in your estate plan can provide peace of mind for both you and your loved ones.

Trustee, Executor and Power of Attorney

Appointing a power of attorney can play an important role in your estate plan. But so can appointing an executor of your estate as well as your trustee.

For an executor and power of attorney, these two roles may be filled by the same person. And while there are different types of trustees, this role can be held by the same person as your executor, and power of attorney. All of these designations can vary depending on your preferences.

How Do I Create an Estate Plan?

When it comes to creating a comprehensive estate plan, it’s important to work with experts who can take into account both your current and future needs. A certified financial planner can help assess your financial situation and advise you on how best to distribute your assets. While an attorney specializing in estate planning can assist in drafting a legally binding will and setting up trusts for minors or those with special needs.

Working together, these professionals can ensure your family is financially taken care of after your passing. It’s also important to regularly update your estate plan as life circumstances change, such as marriage, the birth of a child, or the acquisition of new assets. Meeting with a certified financial planner and an estate planning attorney can help make sure that all bases are covered.


3 Steps to Creating an Estate Plan

1 – Understand the basics.

Before you start putting pen to paper (or finger to keyboard), it’s important to understand the basics of estate planning. This includes understanding common terms like “wills,” “trusts,” and “probate.” You should also familiarize yourself with the estate planning process itself, as well as the various documents that might be involved. Estate planning can be complex, so taking the time to understand the basics will save you a lot of headaches down the road.

2 – Gather your documents.

Start gathering the necessary documents. This includes things like financial statements, retirement accounts, insurance policies, birth certificates, property deeds or any other financial assets you may have. Placing all of these documents in one place will make the estate planning process much simpler and less stressful, and once you know what you have and what it’s worth, you can start making decisions about how to distribute those assets.

3 – Choose your beneficiaries.

Deciding who will inherit your assets when you die can be challenging. This step of estate planning step is often called “beneficiary designation.” Beneficiary designations include primary beneficiary and contingent beneficiary. For example, you might name your spouse as the primary beneficiary of your savings account, and your children as the contingent beneficiaries. That way, if something happens to you and your spouse before your children are old enough to inherit the money, they’ll still receive it.

Estate Planning means planning for your future - Kaizen Wealth

Estate Planning means planning for your future – Kaizen Wealth

Ready to Create Your Estate Plan?

Regardless of their age or wealth level, there are many good reasons why estate plans are important. Not only does an estate ensure you have all of the required documentation in place to carry out your wishes when you pass or if you’re incapacitated, they help minimize estate taxes and protect your loved ones.

If you don’t have a valid estate plan in place already, consider taking action, and creating one is the time to take action and create one. Estate planning is a complex process with many moving parts—but it doesn’t have to be overwhelming.