First Friday Focus: Estate Planning 101

The Basics of Estate Planning, with Nels Donovan

Estate planning can often seem like a complex and distant concept, but in reality, everyone has an estate plan. The key question is not whether you have one, but rather, who designed it. In essence, an estate plan is a roadmap that determines what happens to your assets and responsibilities when you pass away. The government has its own default plan for those who don’t create one themselves, so taking control of your estate plan is crucial.

However, an estate plan is far broader than just dying. That’s the easy part and actually a small part, an estate plan is about taking care of each other or yourself or empowering people to speak for you and you can’t.



The Event of Death

While estate planning encompasses various aspects of your life, let’s start by focusing on what happens after you pass away. The government’s default plan is your nearest relatives be that children, parents, siblings, or others.

You have some very economical choices that can replace some or all of the government’s default plan. This includes beneficiary designations, TOD (transfer on death), and POD (payable on death) where assets like investment accounts, bank accounts, IRAs, 401(k)s, life insurance policies, and your even home (in some states with a TOD deed) can be transferred automatically to beneficiaries upon your death. While this may seem convenient, it can lead to unforeseen complications.

Automatic transfers can be problematic if the beneficiaries face issues like financial instability, legal problems, or medical conditions. These transfers happen regardless of the circumstances, which is why it’s important to consider alternatives.

Taking Control with a Will

One common way to assert control over your estate plan is by creating a last will and testament. This legal document outlines your wishes and instructions for the distribution of your assets after you’ve passed away.

However, wills only become effective upon your death and through the probate court. They can involve a potentially time-consuming, costly probate process.

The Power of a Revocable Living Trust

For those seeking more control and privacy, a revocable living trust can be a powerful tool. This trust allows you to transfer your assets into it, giving you control during your lifetime and a seamless transition in the event of incapacity or death.

With a trust, you can ensure that your assets are managed according to your wishes without the need for court intervention.

Planning Beyond Death

Estate planning isn’t solely about death; it extends to incapacity as well. Incapacity can be a temporary or extended period during which you’re unable to make decisions for yourself.

It’s essential to have plans in place to address who will make financial and medical decisions on your behalf if you become incapacitated.

Powers of Attorney

Powers of attorney are vital documents that grant trusted individuals the authority to act on your behalf. A financial power of attorney (or durable power of attorney) allows someone to manage your finances when you’re unable to do so, while a healthcare power of attorney appoints someone to make medical decisions on your behalf.

Additionally, a living will can provide instructions regarding life-sustaining treatment if you’re in a state of permanent cognitive dysfunction.

Planning for Minor Children

If you have minor children, it’s crucial to plan for their well-being in the event that something happens to you. Your estate plan should designate guardians who will care for your children and manage their finances until they reach adulthood.

This ensures that your children are in good hands and not left to the court’s discretion.

It is also important to note, that even when you are leaving money to a minor, guardianship is an issue to address. A grandparent leaving money to grandchildren may intuitively assume the parents can serve as guardians, but that may require a court visit to become the official guardian for inherited assets.

Consult with an estate planning expert on the best way to leave gifts to minors.

The Estate Planning Process

The estate planning process typically involves several key steps:

  • Initial Intake: Gather basic information about your assets, beneficiaries, and goals.
  • Design Meeting: Discuss your specific wishes and goals for your estate plan.
  • Document Review: Review and understand the drafted documents that reflect your plan.
  • Signing Meeting: Execute the necessary legal documents to formalize your estate plan.
The process usually takes about six weeks from start to finish, and it’s essential to periodically review and update your plan as life circumstances change.

Funding Your TrustFunding is a critical aspect of estate planning. It involves connecting your assets to your trust so that they are protected and distributed according to your wishes. Financial advisors play a role in this process as it often requires additional actions, such as changing beneficiary designations or retitling assets.

Funding your trust ensures that your assets are in sync with your estate plan and is an essential component of a complete plan.

Cost of Estate Planning

The cost of estate planning can vary significantly depending on your specific needs and circumstances. Factors such as the complexity of your assets, the number of beneficiaries, and the level of customization required can impact the cost.

Using beneficiary designations is free and available in the form of beneficiary forms, TODs, or PODs at all financial institutions. There would be a small legal fee to put a TOD on your house.

Estate planning costs vary depending on the type of plan you choose. A will-based plan is more affordable, typically ranging from $100 to $1000, while a basic trust-based plan starts at around $3,500, and a complex one for a couple could be $5,000 to $6,500.

Remember, estate planning is personalized, so consult a qualified attorney to align your plan with your goals. Wills require periodic updates, but trust-based plans can be amended over time.

In conclusion, estate planning involves more than asset distribution; it covers incapacity and child provision. Taking control of your plan ensures your loved ones’ well-being.

If you have more questions and would like to schedule a personal one-on-one call with Michelle, click HERE to access Michelle’s calendar and schedule a day and time that is convenient for you.

We serve clients in Mineral Point WI, Dodgeville WI, Platteville WI, Lancaster WI, Fennimore WI, Boscobel WI, Richland Center WI, Muscoda WI, Spring Green WI, Mazomanie WI, Sauk City WI, Middleton WI, Madison WI, Fitchburg WI, Verona WI, Mount Horeb WI, Barneveld WI, New Glarus WI, Monroe WI, Belleville WI, Oregon WI, Stoughton WI, Darlington WI, Cuba City WI, Hazel Green WI, Belmont WI, Dubuque IA, Freeport IL

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