An “estate” includes all the assets a person owns at the point of death. An estate may include real property, personal property, investments, retirement plans, insurance plans, bank accounts, stocks and securities, and much more.
Estate planning arranges how these assets are to be transferred at the time of death, according to the asset-owner’s wishes. The person who dies owning assets is known as the “decedent”.
Without estate planning, the assets are distributed through a court proceeding according to the default laws of the state, which most of the time is not in line with the decedent’s desires.
The ultimate goal in effective estate planning is to ensure that the beneficiaries (often family members) are taken cared of after the decedent passes, receive property according to the decedent’s wishes, are able to access the assets as soon as possible, and to receive the largest amount with minimal tax or administrative fees.
Estate Planning also involves other key aspects that does not involve assets. For example, in the case where the decedent dies with minor children, the goals are not only to transfer assets, but also to appoint a trusted guardian to look over the children until they reach eighteen. Moreover, once the children reach eighteen, some parents prefer that their kids first finish college or reach a more mature age, such as 25 or 30, before having access to large sums of assets. Most importantly, most parents want to ensure their children are financially responsible before they get large amounts of money, and at the same time, the health, support and education expenses incurred by the child are taken cared of.
Another key aspect of Estate planning is delegating the power to make financial and health decisions to the right person before becoming disabled or incapacitated. Upon reaching old age or before undergoing serious medical procedures, it is an intelligent decision to delegate powers of attorney to a trusted and available person to make decisions for you. If these powers are not delegated before hand, family members must go through court proceedings. The court appoints a guardianship, which is expensive, delays the time to make important healthcare and financial decisions, and sometimes the court appointed guardian might not make all the decisions according to the person’s wishes.