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October 13, 2022

What is Estate Planning? Understanding the Basics

No financial plan is complete without an Estate Plan, which directs what will happen to your assets in the event of your death or incapacitation. It’s not the most fun topic to think about, but it’s important for everyone to consider. We’re here to cover the basics you’ll need to know as you get started with estate planning: intestacy, wills, trusts, and planning for incapacity.

Intestacy

What happens if you die without an estate plan in place? That’s called Intestacy, and it can be a lengthy and inconvenient process for your loved ones. Imagine that you leave $50,000 in a savings account when you die. Who does the money go to? Without instructions from you, the money would go where your state’s intestacy laws direct it to go.

Although laws vary from state to state, a common pattern of distribution divides property between the surviving spouse and children. The intestacy process can be lengthy and create stress for the family, as it’s not designed to accommodate the nuances of relationships or family dynamics. There’s a very simple way to avoid intestacy, though. You can create a will.

Wills

A will is probably the most vital piece of anyone’s estate plan. It’s a legal document in which you direct how your property will be dispersed when you die. Your will:

  • Directs how your property will be distributed
  • Names executor and guardian for minor children
  • Can accomplish other estate planning goals (such as minimizing taxes)

Your will must be in writing and signed by you to be valid, and your signature must also be witnessed. It’s a good idea to have an attorney help you along the way to make sure you can avoid any common “do-it-yourself” mistakes that may invalidate your will.

Trusts

A trust is a fiduciary agreement that allows a third party, the trustee, to hold assets on behalf of a beneficiary or beneficiaries. Trusts can be arranged in various ways to specify exactly how and when your assets pass along to your beneficiaries — and on what terms. With a trust, you can:

  • Create terms for management and control of your assets
  • Minimize the estate tax burden
  • Avoid probate court
  • Save time for your loved ones and increase their privacy

There’s a misconception that trusts are only for the very wealthy, but many families could benefit from having a trust in place.

Planning for incapacity

Finally, you’ll want to have a plan in place for incapacity — a situation where you couldn’t make your own financial or medical decisions. It can happen to anyone unexpectedly. When you don’t have a plan in place, your loved ones are left to make difficult decisions on your behalf without awareness of your wishes. You can avoid this situation by including health-care directives and financial instructions in your Estate Plan.

Questions? Contact a CFS Financial Advisor.

Grow has contracted with CUSO Financial Services, L.P. (CFS) to provide investment services, and your CFS Financial Advisor will help you build a plan that meets your needs. The advisor will look at your current spending, saving and investing, learn about your goals and priorities, make objective recommendations and support your efforts moving forward through the implementation and management of your plan.

SCHEDULE A COMPLIMENTARY CONSULTATION

Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. The Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members. For specific tax advice, please consult a qualified tax professional.


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