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When should I get an estate plan?

Estate planning is an important part when putting together a financial portfolio. A proper estate plan requires a good understanding of your assets and projections for growth. Taking the time to understand your finances in depth now can help you to better ensure you make the most of your financial planning options. As a result, getting an estate plan is highly recommended, regardless of age.

What should I consider when thinking about an estate plan?

There are many different ways to put together a plan, but four of the more common tools that come up during these discussions include:

  • Will. Likely the most well-known, a will is a legal document that outlines the distribution of assets. Without one in place, the state will distribute assets in accordance with applicable laws. This is inefficient as it leads to added expense and time since it relies on the court system.
  • Trust. This legal tool uses a trustee to control specific assets for the benefit of designated beneficiaries. There are many different types of trusts to achieve different goals. Examples include a special needs trust and trusts designed to shield assets from creditors or reduce tax obligations.
  • Beneficiary designations. Some assets pass automatically using beneficiary designations. This is generally included within the paperwork used to start the asset, such as a bank account. It is important to review these designations on a regular basis and update as needed to better ensure the asset does not go to an unintended beneficiary. A common example is after a divorce if you do not want your ex to get the asset.
  • Power of attorney. These documents provide a named individual with the legal authority to make decisions on your behalf regarding finances or healthcare. This is beneficial in the event you cannot communicate your wishes due to incapacitation as a result of illness or death.

It is wise to have an estate plan drafted to your needs. It will likely require a mix of the four tools discussed above.