Estate Planning 101: Why it Matters and How to Take Action

DISCLAIMER: this post is for informational and educational purposes only. This post should not be taken as legal advice or used as a substitute for the same. You should contact an attorney licensed to practice in your state for advice regarding any legal matter.

Estate planning is a critical aspect of financial management that often receives less attention than it deserves. Whether you’re a young professional or nearing retirement, having a well-thought-out estate plan is essential for securing your assets and ensuring your wishes are honored after you pass away.

Why Estate Planning Matters

Estate planning involves more than just drafting a will. It encompasses a comprehensive strategy to manage and distribute your assets in the event of death or incapacitation. Here are key reasons why estate planning should be a priority

1. Asset Distribution: A properly executed estate plan is the only mechanism that ensures that your assets are distributed according to your wishes. Without a plan, state laws (intestacy laws) determine how your assets are divided, despite what you may have orally expressed to friends and loved ones during your lifetime.
2. Minimizing Taxes: Estate planning allows you to minimize estate taxes and maximize the value of your estate passed on to your beneficiaries. Strategies such as trusts and gifts can help reduce the tax burden on your heirs.
3. Guardianship for Minor Children: If you have young children, estate planning enables you to designate a guardian who will take care of them in your absence. This provides peace of mind knowing that your children will be cared for by someone you have exclusively chosen and whom you trust.
4. Avoiding Family Disputes: Clear instructions in your estate plan can help prevent disputes among family members over asset distribution. It provides clarity and reduces the likelihood of a long, drawn out court proceeding.
5. Planning for Incapacity: Estate planning includes documents like a durable power of attorney and healthcare directives that designate individuals to make financial and medical decisions on your behalf if you become unable to do so. Without these documents, your family may be forced to petition the court for adult guardianship or conservatorship in order to obtain health benefits, financial assistance, and make health care decisions on your behalf.

Key Components of an Estate Plan

A comprehensive estate plan typically includes the following components:

1. Will: A will outlines how you want your assets distributed after your death. It also allows you to name an executor who will manage your estate.
2. Trusts: Trusts can be used to manage and distribute assets according to specific instructions. They are valuable for minimizing estate taxes and providing for beneficiaries over time.
3. Beneficiary Designations: Review and update beneficiary designations on retirement accounts, life insurance policies, and other financial accounts to ensure they align with your estate plan.
4. Power of Attorney: A durable power of attorney authorizes someone to manage your financial affairs if you become incapacitated.
5. Advanced Healthcare Directives: These documents specify your preferences for medical treatment and appoint someone to make healthcare decisions for you in case you are unable to do so yourself.

Who Should Have an Estate Plan?

Everyone! Estate planning is more than just for the wealthy. Anyone with minor children should have an estate plan to ensure their well-being and provide them with stability and security should something happen to their parents. Anyone who owns a home, savings account, art collection, or investment account should have an estate plan to ensure these assets are distributed according to their wishes. Unmarried couples or blended families should have an estate plan to ensure that all parties involved are protected. Business owners should have an estate plan to dictate who will inherit the business and how it should be managed. People who are passionate about charitable causes should have an estate plan if they wish to donate assets to a particular charity. Estate planning is essential to any and all legacies.

The Role of Professional Guidance

While it’s possible to create a basic estate plan on your own, consulting with an estate planning attorney and your financial advisor can ensure that your plan is legally sound and meets your specific needs and goals. Together, they can help you navigate complex issues such as tax implications and the use of trusts.

What You Can Do Now

1. Talk to your family. Begin discussing your estate plan with your family. Be sure to inform your family members of whom you have designated to be your executor, power of attorney, and/or healthcare proxy. Discuss guardianship for your children with family members or close family friends.
2. Take inventory of your assets. Compile a list of assets and liabilities—your home, bank accounts, vehicles, retirement accounts, investments, and any debts you hold singly or jointly.
3. Utilize Forms and Local Resources. If you live in the State of Alaska, you can download and complete Power of Attorney and Advanced Health Care Directive forms today. These forms were created for Alaskans by attorneys at Alaska Legal Services.[1] Visit https://alaskalawhelp.org/issues/life-planning/powers-of-attorneyadvance-directives for access to these forms and other life planning resources.
4. Check your beneficiary designations. Update the beneficiary designations on your retirement, life insurance policies, AD&D policies, savings accounts, and any other account where you must designate a beneficiary in survivorship.
5. Make an appointment with your financial advisor. A good estate plan depends on a solid financial plan. Your financial advisor can assist you with determining the best strategy to maximize your assets and protect your family.

Review and Update Regularly

Estate planning is fluid and estate plans should be updated regularly. Life changes such as marriage, divorce, births, deaths, and changes in financial circumstances should prompt a review and update of your estate plan. Keeping your plan current ensures that it continues to reflect your wishes and remains effective.

Take Action Today

Estate planning is a vital tool for individuals and families to safeguard their assets, protect loved ones, and ensure their legacy endures according to their desires. By taking proactive steps to create and maintain an estate plan, you can achieve peace of mind knowing that your affairs are in order and your loved ones are provided for.

For personalized guidance on creating or updating your estate plan, you should consult with a qualified attorney and a financial advisor who can tailor a strategy to fit your unique situation and goals.

Anna Cometa is an attorney at the law firm of Holmes, Weddle & Barcott, P.C. in Anchorage, Alaska. She licensed to practice law in Alaska and Massachusetts. Her practice encompasses commercial litigation, commercial transactions, business organizations, employment law, estate planning, and probate.

The opinions expressed are those of Anna Cometa and not Alaska Wealth Advisors. The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Forward-looking statements cannot be guaranteed.

Alaska Wealth Advisors is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Alaska Wealth Advisors’ investment advisory services can be found in its Form ADV Part 2, which is available upon request. Material presented has been derived from sources considered to be reliable, but accuracy and completeness cannot be guaranteed.

[1] These forms were created for public access and this writer’s reference to the same is not to be construed as providing specific legal advice.