Four Essentials of Estate Planning

Estate planning is the process of preparing for the distribution and management of your assets during life and upon your death. It is a strategic process designed to ensure that loved ones are financially independent even in one’s absence. Here are four essentials included in estate planning.

1. The Will

The will is the cornerstone of estate planning. This legal document determines how an estate will be distributed after death. Without a will, the state assumes control, which may not align with one’s intended wishes. In a will, you can:

• Specify beneficiaries for your assets
• Assign guardians for minor children
• Designate an executor to oversee the distribution of your assets according to your wishes.

The will should be updated regularly to reflect changes in your life and financial situation.

2. Power of Attorney

A power of attorney is a legal document that allows you to appoint someone to manage your affairs if you become unable to do so. It can cover financial matters, health care decisions, or both.

• Financial power of attorney – Under a financial power of attorney, the designated person can handle financial transactions, manage property, invest money, pay bills, and undertake other financial matters on your behalf.
• Healthcare power of attorney – A healthcare power of attorney allows an appointed person to make medical decisions if you become incapacitated.

3. Trust

Trusts serve as a valuable tool in estate planning, helping to manage your assets effectively and avoid probate—a costly and time-consuming legal process. Establishing a trust requires the help of an attorney and collaboration with financial and tax professionals.

Trusts can be structured in many ways and can specify exactly how and when the assets pass to the beneficiaries. To determine if a trust is suitable for your situation, consult a legal professional.

4. Life insurance

Life insurance is a crucial aspect of estate planning as it provides beneficiaries with immediate cash upon your death. This financial protection is vital for dependents, helping them cover immediate expenses such as funeral costs, pay off debts, and maintain their living standards. There are two primary types of life insurance policies:

• Term life insurance –  Provides coverage for a specific period (the “term”). If you die within this term, the insurance company will pay the death benefit to your beneficiaries.
• Permanent life insurance – Permanent life insurance, such as whole or universal life, provides lifelong coverage and has an investment component that can accumulate over time.

Life insurance can also play a critical role in estate planning for high-net-worth individuals, helping pay estate taxes and preventing the forced sale of assets.

Regular reviews and updates to your estate plan will help keep it aligned with your evolving life circumstances and financial situation. Remember, estate planning isn’t just about death—it’s about providing peace of mind and financial independence for those you leave behind.

SWG5045536-1225a This information is provided as general information and is not intended to be specific financial guidance. Before making decisions regarding your personal financial situation, you should consult a financial or tax professional to discuss your individual circumstances and objectives. Estate planning involves legal considerations, and you should consult with a licensed attorney regarding the legal implications of any strategies discussed. The sources used to prepare this material are believed to be accurate and reliable but are not guaranteed.