Estate Planning 101: The Basics You Need to Know

Estate planning is important, but it often feels complicated. Pull up your search engine, type in a seemingly simple question like “what is estate planning”, and you’ll unearth page after page of different answers. What was supposed to be five minutes of researching quickly turns into five hours of confusion and headaches. When you finally walk away from the computer the only thing you’ve really learned is that you’re much further behind than you had thought.

That’s where many people find planning for the future incredibly overwhelming. There seem to be so many documents to create and choices to make. And for every decision, it feels like the stakes are sky high. After all, this is your legacy.

While there is some truth to that — you have a lot of options and your choices are important — at Legacy Law Group, we believe estate planning doesn’t have to be so overwhelming. The right information, taken one step at a time, can transform how you view the entire process. Instead of panic and self-doubt, estate planning can be an affirming process that gives you hope and peace of mind for the future.

We wanted to make the first step of that transformation simple. So we wrote this blog. We call it Estate Planning 101.

In the following paragraphs we explain the basics of estate planning. We give you useful, clear information that you can use to get started planning your legacy.

Sections include:

What is an Estate Plan?
Key Terms and Phrases
Who Needs an Estate Plan?
How to Find an Estate Planning Attorney
What Documents are Needed for Estate Planning?
How Much Does Estate Planning Cost?
Helpful Resources for Estate Planning

Welcome to Estate Planning 101. Let’s get started.

What is an Estate Plan?

An estate plan is a guidebook for your legacy. It is a comprehensive strategy for managing your assets and tending to your affairs should you become incapacitated or disabled during your lifetime and when you pass away. A complete estate plan includes legal documents and financial directives. It outlines your wishes and helps protect what you’ve built and care for your loved ones.

Without such a clear plan, your estate can become a bit of a mess. Instead of following your wishes, your physical and financial affairs may be decided by the courts. This can create conflict within your family and subject your estate to unnecessary taxes and your family to unexpected expenses. The probate process can go on for months and is difficult on families who may already be strained by your loss.

We know that no one wants to create a hassle for their family, but it can be difficult to know when it’s time to make an estate plan. Fortunately, we have some guidelines to help you decide if it’s time to get started.

Key Terms and Phrases

Before we dive into the finer details of estate planning, let’s get some additional context. Like any legal process, estate planning can have enough terms and acronyms to make your head spin! We’ll be mentioning a few key terms throughout the blog that are important in the planning process, so we’ve added their definitions below.

Attorney: a professional who is trained, educated, and licensed to practice law, often with a specialization such as estate planning.

Probate: the legal process by which the courts oversee the administration of an estate for a person who died either with a valid will or without any planning. This process varies by state.

Administrator: the person in charge of administering your estate post-death, also sometimes referred to as an executor or personal representative.

Guardians: those who will care for your minor children in the event you are not able to do so

Beneficiaries: individuals who will inherit from you, either your natural heirs as defined under law or your chosen beneficiaries in your estate plan

HIPAA (Health Insurance Portability and Accountability Act): protects your personal healthcare information from being shared with other individuals, offices, or companies without your express permission
Trust: a legal entity that can own assets and protect and preserve them for the beneficiaries. There are many different types of trusts that can be used in estate planning to achieve different outcomes. Trusts can be revocable (can be changed at any time) or irrevocable (can only be changed through a court order.)

Who Needs an Estate Plan?

The COVID-19 pandemic has sparked new awareness about the importance of estate planning, but still only 33% of Americans report having a plan in place. Most people without an estate plan say it’s because they have too few assets to leave behind.

In our opinion, every adult should have an estate plan. It’s important to remember that this plan is more than just how you’ll divide your wealth. It’s also who can make decisions about your finances and healthcare, and who will be in charge of your personal care and your assets if you’re disabled.

At Legacy Law Group, we believe an estate plan is about what you value, not your net worth. These are a few of the situations in which we recommend having an estate plan:

You care about something greater than yourself.
You want to help your family in the event you pass away or are disabled.
You’re married and want to protect and provide for your spouse and family.
You have assets such as a retirement account or investments that you want to protect.
You want settling your estate to be easy and stress-free for your family.

You might fall into one of these categories but still feel like you don’t have enough to pass on or don’t qualify for creating an estate plan. There are a few questions that can help you determine if you’re at a place in life where having a plan is wise.

When to Start Planning

You can start planning your estate as early as 18 but most people don’t start that soon. Instead, they’ll wait for a major life event or health scare, which in many cases is too late. There are two different ways you can approach finding the right time to start your estate plan: by assets or by milestones.

Assets

Consider these questions:

Do you own your home?
Do you own a business?
Do you work in a high-risk profession (medical, legal, real estate investing, etc)?
Do you have assets such as a retirement account or other investments?

If you answered yes to any of these, then you can benefit from an estate plan. You can draw up documents that help you plan the succession of your property, business, or assets. You can also create a plan that provides financial protection for your family in the event you’re seriously injured or lose your life on the job.

Milestones

Life milestones often mark significant change, which makes them the perfect time to evaluate your estate plan. Here are a few examples of when to think about your plan:

Getting married
Buying your first house
Cohabitating
Having a baby
Caring for a loved one with special needs
Starting your own business
Receiving an inheritance
Moving out of state or buying property out of state
Selling your business
Getting divorced
Health concerns
Retiring

Who Can Help?

Because your estate plan is a mix of financial planning and legal documents, you’ll need a group of professionals to help you create it. An estate attorney can help you identify the legal documents you need and help you draw them up. If you have a financial advisor or CPA, your attorney will often offer to work with your financial team to ensure you have a well-thought-out plan.

Aside from this core group, you might choose to bring in other help as well. For example, if you own or are selling a business, you might choose to include your business attorney or business exit planner. They can offer insights into your specific situation and coordinate with your attorney and financial professionals to ensure your plan fits your needs and addresses all your concerns.

How to Find an Estate Planning Attorney

Finding an attorney you trust is a key part of the estate planning process. You want to make sure the professionals you work with are not only qualified but also a good fit for your needs.

With that in mind, there are a few personal qualities you can look for when meeting with potential estate planning attorneys:

Active listening
Understanding
Open to questions
Heart of a teacher

These attributes show that the attorney is invested in your peace of mind and willing to teach you about the process. Your attorney should be someone you’re comfortable asking questions and who offers answers you understand. Their professionalism and demeanor should reassure you that they’re working with your best interest in mind.

Aside from their personality, you want an attorney that meets key professional criteria as well. Look for someone with a team to help them with all aspects of the estate planning process and who uses a proven process to help their clients.

Additionally, you want to hire someone who specializes in estate planning. They have the most in-depth knowledge of strategies and best practices to help you create the plan you need.

At Legacy Law Group, our entire team specializes in different aspects of estate planning. We care about preserving our clients’ legacies by protecting their assets both now and in the future. To do that, we offer a variety of estate planning services that include the documents they need to make their plan official.

What Documents Are Needed for Estate Planning?

There’s a long list of documents that could be used in estate planning, but not every person will require all of them. Your estate plan and the documents within it should be tailored to your specific needs and situation.

Here are a few examples of estate planning documents and what they do:

Last Will & Testament – allows you to plan for your estate at death, nominate an executor, name beneficiaries, and instruct your executor on how to distribute your assets. Requires the probate court process to administer.

Revocable Living Trust (RLT) – functions essentially as your will but does not require the probate court process to administer as long as it is properly set up and maintained. .

Living Will – allows you to declare how you want things handled in the event of terminal injury or illness, with no medical probability of recovery, including whether or not to remove or refuse artificial life-sustaining measures.

Financial Power of Attorney (POA) – allows you to choose the individuals you would want to manage assets and make financial decisions on your behalf at your incapacity.

Healthcare Power of Attorney – allows you to name the agents you would want to make your medical decisions on your behalf at your incapacity.

HIPAA authorization – authorizes people you choose to access your medical information and discuss your medical condition with medical professionals.

The best way to determine which legal documents you need in your estate plan is to consult with your attorney. They’ll review your goals and help you select the best plan that includes all of the documents you’ll need to ensure your estate is handled properly. Don’t worry if you don’t have this all figured out yet! Here at Legacy Law Group, we don’t want this to be the reason that you don’t get started with your planning. Many people delay their planning until they have all these decisions figured out, which often results in their plan remaining incomplete. We are here to help guide you through these important and sometimes difficult decisions to help you get this done, and done right.

How Much Does Estate Planning Cost?

The number of documents or level of service you need is often the biggest factor when determining how much estate planning will cost.

Typically attorneys will bill for this service in one of two ways: on an hourly basis or on a fixed fee basis. With an hourly rate, the attorney may give you a soft quote or a ballpark fee and then will bill you for the number of hours spent working on your estate plan multiplied by their rate. This can make the cost of estate planning highly variable and difficult to prepare for.

At Legacy Law Group, we package our services and utilize an all-inclusive flat-fee billing structure for each type of estate planning, so that our clients know exactly what their fees will be for their entire project.

Helpful Resources for Estate Planning

As we mentioned at the beginning of this blog, there are many helpful online resources that can guide you through the process of estate planning. Some of our favorite resources include:

Two Key Steps to Successful Estate Planning
Estate Planning Information and FAQs from the American Bar Association
I Don’t Have an Estate. Why Do I Need an Estate Plan?
Introduction to Wills
Important Estate Planning Questions

To help you determine what you might need from an estate plan, we also have an estate planning warmup exercise that can show you what direction best suits your needs.

Plan for Your Future

An estate plan is about what you value, not how much money you have. So whether you want to make sure your family is taken care of or you want to keep loved ones out of probate court when you pass away, having an estate plan is how you can continue to care for the people you love.

Our estate planning warmup should give you a good idea of what documents you might need to set up your estate for its beneficiaries. If you’re ready to get started, you can schedule a discovery call with our team. We’d be happy to review your situation and recommend the best course of action.