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Financial planning

Essential estate planning documents

Mature couple doing some paperwork and calculations at home
Mature couple doing some paperwork and calculations at home
bernardbodo/Getty Images/iStockphoto

It is always beneficial to review estate planning with a legal professional to determine what is right for you.

It is common to think that estate planning is only for the wealthy. But everyone has assets like money, property and belongings. Estate planning is meant to help prevent you and your family from suffering financial, logistical and even emotional burdens later on in life. You can get started by understanding some of the key documents and tools that make up an estate plan.

Depending on your specific situation, there are various tools available that can be incorporated into an estate plan. Some examples of estate planning tools and documents include wills, powers of attorney, advanced care directives and trusts in some situations. Given the legal nature of estate planning tools, it is always beneficial to review estate planning with a legal professional. Thrivent does not provide specific legal or tax advice, but we can partner with you and your tax professional or attorney to provide details on your overall financial strategy at Thrivent.

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What is a will and why do you need one?

A will is a legal document in which you name one or more people to manage your estate and perform detailed distribution of your property at death. No matter the size of your estate, establishing a will and designating beneficiaries of your assets can be an important step in your estate planning.

With a will, you may be able to accomplish such things as:

  • Designate who will receive your assets, including an institution or charity, as well as how and when.
  • Direct who will receive your property if you and your spouse pass away at the same time.
  • Designate a guardian or guardians for your dependent children.
  • Name your personal representative to serve without bond, saving your estate money.
  • Designate the source from which estate settlement costs are to be paid.
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What is probate?

The greatest obstacle preventing some people from completing a will is not the cost, but the uncomfortable feelings associated with death—especially their own. However, when an individual dies and there is no will, that person is said to have died intestate. When this happens, the person’s probate property is distributed according to state intestate laws.

Probate is the court procedure for collecting a decedent’s assets, liquidating liabilities, paying taxes and distributing property to heirs, carried out by a personal representative or executor under the supervision of the probate court.

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A power of attorney provides proper management of financial and legal affairs.

A power of attorney is a written document that identifies who will make financial, legal and tax decisions on your behalf should you be unable to make them yourself. Generally, a power of attorney is established while you are legally competent. All rights to act under a power of attorney end at the time of your death. Without a durable power of attorney, no one can represent you unless a court appoints a conservatorship or a guardian. That process could take time, costs money, and the judge may not choose the person you prefer. When you create a power of attorney, you can appoint anyone you want and specify what they can or cannot do on your behalf.

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An advanced care directive names a proxy should you become incapacitated.

An advanced care directive, also known as a living will, states your medical treatment preferences. All adults have the right of “informed consent” in their healthcare. However, there may be situations when you may not be capable of making your care decisions. This is when a living will is essential, because it tells your family and healthcare professionals how far you want your treatment to go, should you become seriously ill.

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A trust helps ease the transition of assets.

A trust is an arrangement created by a grantor whereby a trustee holds the property for the benefit of the trust’s beneficiaries. There are different types of trusts and arrangements that can be made within trusts; therefore, it is important to seek the assistance of an attorney when establishing one. An attorney can go through the steps to ensure your trust is created according to your needs and desires.

Potential benefits of trusts include:

  • Transfer of an inheritance without probate (the legal review required before someone can inherit assets named in a will).
  • Unlike wills, which may become public record, a revocable living trust retains privacy.
  • The option to “bucket” assets. For example, a married couple could put their pre-marriage assets into revocable living trusts to separate them from jointly owned funds.
  • You can, under certain provisions, extend it to serve subsequent generations. This creates an efficient alternative for managing some of your family’s assets.

In some cases, a revocable living trust can also ease the burden of estate taxes. Talk with your accountant to see if this may apply to your family.

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Getting started.

Before you get started with your attorney, take time out for a serious discussion with those who you’d like to include in your estate planning.

Remember, an estate plan is not a “set it and forget” process. Assets may increase or decrease, relationships may evolve or devolve, and other significant life events happen—all necessitating changes in your plan. To make sure your estate plan is still best for your situation and complies with current laws, review with an attorney every three years. When you consider what’s at stake, taking the time to do this work is an essential step in planning for a secure future.

Connect with a Thrivent financial advisor to discuss your overall financial plan.

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This is for informational purposes only. This information is meant to act as an aid in formulating your wishes and expressing them to your estate planning attorney.
4.15.12