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Estate Planning 101

It’s never too early to start thinking about estate and financial planning. If you’re not sure where to start, we’re here to help.

Senior couple meeting with a wealth manager

You’ve worked hard to build your savings and wealth over your life, so it’s crucial to ensure that whatever assets you have when you’re no longer here are passed down to your loved ones. Careful estate planning can help protect your wealth and leave your financial legacy to the most important people in your life.
It’s never too early to start thinking about estate and financial planning. We’re here to help if you’re not sure where to start.

What is Estate Planning?

What estate planning means will vary from person to person. In its simplest terms, your estate is anything you own. That could be your car, home, furniture, insurance policies, and the money you have in the bank.
Making plans for what to do with these assets when you die is important. An estate plan is a roadmap for how you want those personal possessions to be distributed to your loved ones and ensures that they’re legally protected.
The most common documents that make up an estate plan are:
  • A will. Your will outlines precisely how you want your property and assets to be distributed to your loved ones upon your death, along with any information regarding the ongoing care of your dependents. Without a will, your estate could be left in the hands of the state or could cause family disagreements about who should receive your assets.
  • Trusts. Wills and trusts are both legal documents that decide who has a right to your property. Within a trust, you can legally grant another person, the trustee, to hold property on your behalf for your beneficiaries to benefit from in the future. This is particularly useful if your beneficiaries are still young and aren’t able to handle their inheritance yet.
  • Power of attorney. A power of attorney, or POA, grants authority to someone else to act on your behalf in legal, financial, or medical decisions. If you’re unable to make these decisions on your own during your lifetime, your appointed person is designated to do so for you.
  • Living will. Usually part of healthcare planning, living wills note your wishes for important decisions like life-extending medical interventions and treatments or end-of-life care.
  • Health care directives. Outside of a living will, you may also have other medical directives that you want noted. Your POA can then carry out these wishes if you’re unable to voice those for yourself.
  • Tax planning documents. Inheritance and other taxes can be confusing, especially those you may be leaving behind in their time of grief. As every state has its own tax rules and regulations, it’s important that local, state, and federal tax planning is accounted for in your estate plans. Wisconsin currently does not have an estate tax in place, but Illinois does, so it’s important to clarify these rules with your accountant and estate planner.
An estate planner or wealth manager is the best person to discuss your specific needs with, as they can recommend documents or planning tools that best fit your financial situation.

Who Can Benefit from Estate Planning

A common misconception is that estate planning is only for the very wealthy. In reality, everyone should consider having at least a power of attorney or living will, regardless of the financial assets you might own.
You’re also never too young or old to start thinking about wealth management. None of us know what’s around the corner, and it’s always best to have the peace of mind that comes with creating these plans with the hope that you won’t need to put them into practice for many years.
For unmarried couples in a serious relationship, you should consider if you want to include them in your will or as your power of attorney to ensure that they retain access to any joint property or assets you might have. One thing to note is that power of attorney terminates upon the principal’s death. Without a will, your unmarried partner may not automatically receive your assets, and they’ll pass to your closest relatives instead.
Married couples should still consider trust and will protections for their assets. Several tax exemptions may be passed to the surviving spouse, but this becomes complicated if the surviving spouse remarries or isn’t a US citizen.
If you have children, you should also think about what provisions need to be made for them. Wills are crucial as they name the legal guardian should both parents pass away before the children become legal adults. There are also some states where property is inherited directly by the children, not the surviving spouse.
It’s always best to consult an attorney to discuss trusts for children or other dependents and your wishes toward other loved ones. If you haven’t started your estate planning yet and are nearing retirement age, you can incorporate many of your retirement plans into your wider estate planning.

Estate Planning vs. Retirement Planning

Planning for both retirement and your estate usually go hand-in-hand. While retirement planning and investment management focuses more on helping you enjoy your post-work years, estate planning is about creating a plan for what happens to your remaining assets once you die.

Estate Planning Checklist

Starting with the basics is always a good place to begin when you’re thinking about estate planning for the first time.
Take an inventory of all your assets, including bank accounts, IRAs, brokerage accounts, and any other investments you have. Note the account information, along with the financial institutions they’re at. Any other valuables, like personal property, should also be included in this list.
From there, list any outstanding debts, like mortgages, personal loans, car loans, or any other debts you have.
You’ll need to think about what your family members might need in the event of your death. Spouses, children, or other dependents who survive you may need financial support, so think about who you want to have cared for, if there are any special needs trusts you should be setting up to care for dependents, and how much you can reasonably support those individuals.
Now is also the time to update all the account beneficiaries you have on your retirement accounts, insurance policies, transfer-on-death (TOD) accounts, or anything that will pay out to people you care about.
Choose your healthcare directives and put these together as part of a living will, and assign a trusted power of attorney that you know will act in your best interests and talk to them about your wishes. Determine how you wish for your remaining estate to be divided and have this all noted for when you work with an attorney or estate management expert.

Get Advice on Estate Planning Today

First National Bank and Trust is here to support you through the estate planning process and answer any questions you might have.
Get started on estate planning today and contact our wealth management experts to start making your plans. You can also learn more about wills and trusts, along with exploring insurance options for your retirement and beyond.