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The second most important component of a financial plan involves deciding how you want your assets distributed.  Additionally, an estate plan decides how to handle your care and your finances, should you become incapacitated.  Without an estate plan, a probate court will decide all estate matters, which may or may not follow your wishes.  Proper estate planning offers several benefits:

  1. Named Beneficiaries - You name the people to whom you wish to bequeath your assets. Your wishes are legally binding.
  2. Tax Management - You can arrange it so that taxes siphon as little as possible from your estate.
  3. Peace of Mind - The satisfaction of knowing that your financial affairs are in order, so you won’t bequeath a costly administrative nightmare to your loved ones

Eunoia recommends that an estate plan include several documents, and possibly trust documents as well.

  1. Recommended Documents
    1. Will – Details how, and to whom, you want your assets distributed
    2. Power of Attorney – Assigns a person, or persons, the authority to manage your financial affairs if you are unable to do so.
    3. Living Will - A statement of your wishes for the kind of life-sustaining medical intervention you want, or don’t want, in the event that you become terminally ill and unable to communicate.
    4. Healthcare Proxy - Authorizes a person, or persons, you trust to make medical decisions on your behalf.
  2. Optional Document(s)

Trust – Depending on your individual circumstances and/or goals, one or more may make sense.

 

Note on estate taxes:  If you intend to leave all of your assets to your spouse, estate taxes do not come into play.  You can leave an unlimited amount of money to your spouse tax-free.  Otherwise, your estate will owe taxes only if its value, including real estate, life insurance proceeds, retirement accounts and investments, exceeds a certain threshold, known as the estate tax exemption.  If your estate is large enough to trigger the estate tax, only the amount that exceeds the exemption will be taxed.  In 2016, the estate tax exemption was $5.45 million.  Depending on each person’s situation, a properly executed Will and Trust documents can help lower the tax burden of your estate.

Will

A will is a legal document that communicates your wishes as to who should receive your assets after your death.  It also allows you to name guardians for dependent children.  Without a will, the courts decide what happens to your assets and who is responsible for your children.

Wills do have limitations however.  In particular, the beneficiary designations on financial... Read More

Power of Attorney

A power of attorney is a legal document authorizing one person, or persons, to act on another’s behalf.  The purpose is to assist those who are no longer able to help themselves.  However, this is a powerful document as it effectively grants your decision-making privileges to someone else.  With this document, the designated person can open or close bank... Read More

Living Will

A living will is a legal document that allows you to express your wishes to doctors in case you become incapacitated.  In a living will, you can outline whether or not you want your life to be artificially prolonged in the event of a devastating illness or injury.  In the event of an unexpected incapacitation, the living will is referenced before any life or death... Read More

Health Care Proxy

Often combined with a living will, a health care proxy allows you to designate someone to make health care decisions for you in the event you become incapacitated.  The living will and the health care proxy together make up what’s called an “advanced health care directive”.  Your designated proxy is legally authorized to work within the bounds of your living... Read More

Trusts

Most trusts deal with specific assets, such as life insurance or a piece of property.  However, a trust does not replace a will.  A will governs distribution of nearly everything in your estate while a trust governs a particular asset for a particular purpose.

In addition to handling a particular asset, a trust can be a useful estate-planning tool for lots of people. ... Read More

Contact Eunoia Financial to learn more about what we can accomplish together