Matthew Fassnacht Discusses The Five Components of Estate Planning

It’s not a topic that many of us like to think about but planning for our estate is one of the most important things we can do for our loved ones. By taking the time to plan, Matthew Fassnacht, Founder of Meridian Investments Partners of Atlanta, Georgia, believes that we can ensure that our loved ones are taken care of emotionally and financially after we’re gone.

What is Your Estate?

Your estate is defined as all of your assets minus any debts and other obligations that you owe. Your executor will be responsible for managing the estate and ensuring that your loved ones receive what you want them to have after you pass. This can sometimes be a complicated process, so everyone needs to set up an estate plan early on in life especially if you have children.

What is Estate Planning?

Estate planning is the process of putting together a plan for your estate providing banks, insurance providers, property information, and other details to ensure that it’s easy for your executors to make sure that your wishes are carried out.

There are five essential components to estate planning: wills, trusts, healthcare directives, powers of attorney, and beneficiary designations. Let’s take a closer look at each one.

Wills

A will is a legal document that tells others what you would like to happen after your death. It can state whom you would like to be in charge of caring for your children and where they should live after your death. It may also specify which assets go to specific people and whether beneficiaries should use any money for funeral expenses or debts owed by the deceased person at their time of death.

A will may also name someone as a backup to be in charge of your children and other assets if the named executor is not available. However, a will must go through the probate process, taking time and can take money in the form of legal fees.

A will becomes invalid if the testator (the person who creates the will) dies without signing it, or they sign it under duress (such as when someone else has a gun to your head and asks you to sign).

Trusts

A trust is a separate legal entity that allows you or a designated trustee/s manage property for beneficiaries (others). There are two main types of trusts.

1. Irrevocable Trust — For this type of trust the person creating the trust and contributing assets to the trust (also known as the “grantor”) gives up the right to change the terms of the trust. This type of trust provides asset protection against creditors and allows you to move assets out of your estate for estate tax purposes.

2. Revocable — For this type of trust the terms of the trust can be changed, and the assets continue to be the property of the individual who creates the trust and therefore receives no asset protection from creditors and the assets are included in your estate for estate tax purposes.

Powers of Attorney

A power of attorney appoints another person (or persons), called an agent or attorney-in-fact, to perform financial tasks for you should you become incapacitated. A durable power of attorney will remain in effect even if you become incapacitated or incompetent. A power of attorney becomes invalid if you become incapacitated and your doctor determines that you cannot make rational decisions.

Without a durable power of attorney, your loved ones would have to petition the court each time they need to act on your behalf — and Matthew Fassnacht understands that this could be very expensive and burdensome due to court costs and legal fees.

Healthcare Directives

A healthcare directive is a document that states what type of medical care the creator wishes to receive (or not receive) should they ever be unable to make decisions regarding their condition.

A healthcare directive should include which medical treatments you wish to receive and which ones you do not want. This document may also state who can speak on the creator’s behalf should they ever be unable to communicate their wishes.

Beneficiary Designations

A beneficiary designation is a form you fill out when setting up bank accounts, stocks, bonds, insurance policies, and retirement plans. Beneficiary designations prioritize will provisions regarding the distribution of assets according to federal law, so you must periodically review your various account forms to ensure that your beneficiaries are still accurate.

If you do not name a beneficiary, the law in your state of residence at the time of death will determine who gets what.

You should also remember that life insurance payout values may differ from what you had expected because of changes in premium payments or other circumstances. By taking time now to plan for our estate, we can ensure that our loved ones are taken care of financially after we’re gone — without putting them through costly or time-consuming court procedures.

Final Thoughts

Estate planning is not easy to deal with, but it needs to be handled. Take some time to learn about the five components of estate planning and get started on this important process.

By remembering the five components of estate planning — wills, trusts, health care directives, powers of attorney, and beneficiary designations — we can ensure that our loved ones are provided forever.