People think estate planning is only for the rich or elderly.  Only for people who have very special situations which require a lot of advance planning.  Unfortunately, they couldn’t be more wrong. The problem comes from the misunderstanding of what “estate planning” really is.

In the simplest of terms, estate planning is writing down your wishes for what you want to have happen if you die or become incapacitated.  In fact many people have already done some estate planning and don’t realize it.

If you have a life insurance policy, or have named someone as the beneficiary of your 401K or retirement plan, you have done some estate planning.

There are three major objectives in estate planning:

1. Give your stuff to the people you want.

This can be done through a will or a trust. Most people are familiar with this type of estate planning. A will is a bare bones plan which simply directs where your property goes if you die.  A trust offers significant benefits in terms of asset protection, control for your children, and potentially can help your heirs avoid the probate system.

2. Make sure your minor children go to the home you choose.

In Arizona and many other states, you have the ability to name a guardian for your children if you die.  This allows you to select who will be your children’s new parents.  If you don’t write this down in a legally enforceable way, the court will be forced to decide.

3. Establish who will make your decisions if you cannot.

This is the often overlooked part of estate planning, because it doesn’t involve your death, only your incapacitation. Appointing people to make decisions for you in the event that you cannot make your own decisions is critically important.  The unfortunately common situation with powers of attorney is that most people don’t consider them until a loved one is incapacitated and cannot make his or her own decisions. However, a power of attorney can only be given by someone who has capacity, therefor after an accident or a stroke, it’s often too late. The family member or friend must now go to a court and apply to be appointed guardian over the individual.

This is only a general overview of what estate planning is.  Everyone and every family is unique and their plan must be tailored to fit their needs.