The Wealth Accumulator: Estate planning

Estate planning the use of legal tools to make sure your estate (wealth) is distributed to your intended beneficiaries. Due to frequent changes in estate laws and taxation laws, I recommend consulting your attorney when planning your estate.

Getting started
The first thing you should do is to list all your assets and liabilities and determine your net worth. Your assets should include bank accounts, retirement accounts, insurance policies, real estates, bonds, stocks, mutual funds, and business interests. You should plan which assets will pay off your liabilities and which assets be distributed to whom.

Will
A will lets you decide how you want your estate to be distributed and lets you appoint guardians for your children. If you do not have a will and die intestate, the courts will distribute your estate according to the law, usually between your surviving spouse and children or among your relatives, and your closest adult family member will probably assume guardianship over your children.

If you don't yet have a will, you should have one written now. If you write one when you are old and dying, possibly suffering from mental or communication disabilities, your will may be challenged under the premise that you were subject to undue influence, coercion, or fraud. Get a lawyer to write your will to reduce the probability that the courts will invalidate your will or misinterpret your intentions.

Update your will upon major life, family and wealth changes, such as marriage, divorce, birth of a child, buying a house, or buying a business. Even if you don't have any major changes to your life or family, you should review your will annually and update it if necessary.

Trust
A trust is an arrangement where a trustee manages money or property for the beneficiary under the legal entity of the trust. A trust is useful for placing conditions how and when your assets are distributed, protecting your assets from creditors and lawsuits, and reducing estate and gift taxes. The advantage of a trust over a will is that it avoids probate, remains private, and may reduce estate and gift taxes.

If you decide to use a trust, you will still need a will to pour-over all assets that have not yet been assigned to the trust at your death. You may also assign power of attorney for finances and have your agent transfer your assets to the trust if you become terminally ill.

Before you die
Wills and trusts will distribute your estate according to your wishes when you die. But you should also have a power of attorney and a living will to take care of things while you are alive but incapacitated (unable to communicate or make decisions).

Power of attorney
A power of attorney allows you to appoint an agent (attorney-in-fact) to make decisions and act on your behalf. You should find someone you trust and understands your financial and health care preferences to be your agent.

You should have a power of attorney for finances, so your agent can pay your bills and manage your finances. This is important if you have a trust and want your assets to be transferred to the trust before you die to avoid probate. If you did not assign power of attorney, the court may appoint a conservator to manage your finances when you become incapacitated. If you assign power of attorney to a family or friend, they may serve as your agent free-of-charge. But a court-appointed conservator will charge fees for services rendered.

You should also have a power of attorney for health care, so your agent can help you make decisions on your health care if you become incapacitated. If you don't have one, your spouse or family member will assume the role. However, there may be disputes as to who has your best interest in mind. To save your family from trouble, appoint one person to be your agent.

Living will
A living will allows you to specify what life-sustaining medical interventions you want or don't want if you become terminally ill and incapacitated. Be specific whether you want to be resuscitated or intubated. This will save your agent or family from having to make life-or-death decisions for you.

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