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It’s a common misconception that you need to be extremely wealthy to have an estate plan. That’s not the case—it’s a good idea for everyone with assets to prioritize estate planning.

If you’re unsure about what estate planning is or why it’s so essential, then this article is for you. Keep reading to learn about what an estate plan consists of and why they are a crucial component of financial planning. Let’s get started.

What Is Estate Planning?

Your estate includes everything you own, including money, possessions, properties, and any other assets. The estate planning process includes determining how your assets will be preserved, managed, or distributed after you pass away or become otherwise incapacitated. The most fundamental tasks in estate planning are setting up trusts, making a will, making charitable donations, naming beneficiaries and an executor, and organizing your funeral arrangements. 

One of the most common goals of estate planning is to ensure that beneficiaries receive assets while managing the amount they will have to pay in estate tax, gift tax, income tax, or any other taxes. 

Having an estate plan helps you arrange your financial and personal matters appropriately so that you and those close to you are prepared for any unexpected changes in life. Throughout the estate planning process, you have to ask yourself how you want your assets to be distributed. To get help as you set up your plan, you’ll likely want to speak to a financial advisor and a lawyer that is experienced in estate law.

How Does an Estate Plan Tie Into Financial Planning?

Estate planning is a vital component of your financial plan for the future. Financial planning is often used to maximize your potential and grow and manage your assets to help you meet your life goals. It helps you oversee your money and your investments in a way that ensures you earn more over time, while estate planning aims to help you make decisions about what will happen to said assets when you are no longer able to claim them.

Along with that, estate planning also includes elements that aren’t connected to finances, such as electing a person to take on power of attorney or make health decisions on your behalf.

The bottom line is that estate planning is a kind of financial planning, as it involves managing assets and preserving asset value for the benefit of your loved ones. With that said, people often confuse financial planners with estate planners, but in reality, these are two different kinds of professionals.

Who Are Estate Planners and What Do They Do?

Estate planning attorneys are often the professionals that help you make your estate plan. Even though most financial advisors can help you with your financial strategy related to your estate plan, they cannot offer legal advice or draft legal documents. This is where estate planning lawyers come into play. 

The job of an estate planning attorney is to help you organize your assets in the best way possible to protect their value and ensure they are distributed properly. Because this is a vital decision that affects those closest to you, it’s a good idea to spend time looking for an experienced estate planner who will consider all of your preferences and concerns and is able to create a detailed plan backed up with legal documents.

The Parts of an Estate Plan and Where to Start

If you want to start the process of creating an estate plan for yourself, there are six steps you should follow.

Take Inventory of Your Belongings

Many people think they don’t have enough assets to justify estate planning. However, once you start looking at what you have, you might be shocked by how much you own. And remember, you have to consider both tangible and intangible assets.

Tangible assets include: 

  • Land, homes, and other real estates
  • Vehicles such as boats, cars, and motorcycles
  • Collectibles like art, antiques, coins, or trading cards
  • Any valuable personal possessions

Intangible assets include: 

  • Any stocks, bonds, or mutual funds
  • Life insurance policies 
  • Retirement plans 
  • Health savings accounts
  • Ownership in a business
  • Checking and savings accounts

Once you’ve inventoried both your tangible and intangible assets, it’s time to estimate their value. 

Consider Your Family’s Needs 

After calculating the value of your assets, it’s time to consider how you can protect them for your family after you’re gone. This is also the time to make plans that are not finance-related. Here are some things you should think about:

  • Consider your life insurance. Make sure that your life insurance plan is up-to-date. The “right” amount of life insurance depends on factors such as marital status, whether you have a child or not, your current lifestyle and financial restraints, etc. 
  • If you have younger children, elect a legal guardian. Name a backup guardian too, just in case.
  • Document your wishes about your children’s care. Don’t presume that other family members will share your perspective in regard to child care.

Establish Your Directives 

You cannot have an estate plan without necessary legal directives in place: 

  • A trust: A revocable living trust will help you designate portions of your estate to go toward certain things while you’re alive. After you die or become incapacitated, your trustee can take over. Furthermore, the trust assets will go to your beneficiaries after your death, bypassing probate. 
  • A medical care directive: This is often referred to as a living will and it contains your wishes if you become unable to take care of yourself and make your own decisions. You can also give a trusted person authority over the medical decisions that have to be made. 
  • A durable financial power of attorney: This allows you to appoint someone to manage your finances if you are unable to do so yourself. 
  • A limited power of attorney: This document poses limits on the power you give to your named representative. For example, you can grant the person the power to sign documents only in specific cases. 

It’s important to consider who you give power of attorney to, as they will have a large amount of control over your assets and other aspects of your life.

Review Your Beneficiaries 

Your will and other documents may contain your wishes; however, they are not all-inclusive. That’s why you should: 

  • Check your insurance and retirement accounts. They have beneficiary designations that you will want to keep track of and update if required. 
  • Make sure you keep your will up-to-date. For example, if your beneficiary is your ex-spouse, you might want to consider removing them.
  • Don’t leave any beneficiary sections empty. In that case, if the account goes through probate, it’s possible for it to get distributed based on the state’s rule for who gets the property. 
  • Name contingent beneficiaries. They are necessary in case your primary ones die or become incapable of becoming beneficiaries.

Think of Your State’s Estate Tax Laws

One of the main goals of estate planning is to preserve the value of your assets as much as possible for the benefit of your loved ones, so minimizing inheritance and estate taxes should be a top priority. That’s why when considering making an estate plan, you should consult with your attorney to learn more about the federal and state taxes associated with passing on your estate. 

Consider Whether You Need Professional Help 

Whether or not you need to hire a tax professional or an attorney depends on your situation. If you don’t have much in the way of assets and don’t have many wishes about asset distribution, then a packaged will-writing program may be enough for you. 

However, if you have a large estate, a large family, or a lot of wishes regarding asset distribution, you should definitely consider contacting a financial advisor and an attorney. Along with that, if you have any questions regarding the estate planning process, working with a professional can help you feel more secure in the decisions you are making. 

The Importance of Updating Your Estate Plan

After creating an estate plan, it’s vital that you keep it up-to-date. Check-in annually (or at least every few years) to make sure that each and every document is updated. It’s also a good idea to review whether any new laws will impact your estate plan, including new tax laws. 

Doing a review of your estate plan will also ensure that your trustee, the people in your will, and the people you grant power of attorney to are who you want them to be. For example, you might consider removing your ex-spouse from your estate plan if you get a divorce, or you may want to add an adopted child.

It’s hard to predict exactly when your estate plan will need updates, but a good rule of thumb is to review it any time a significant change occurs in your life or when a new law or regulation is passed that will affect your estate or your asset distribution.


Having an estate plan is a great way to ensure that you have control over what happens to your assets in the case of your death or if you become incapable of making decisions at some point in the future. There are many different parts of an estate plan, and experienced professionals such as estate attorneys and financial advisors can help you get everything organized to your liking. 

The bottom line is that estate planning helps you take care of your family even after your passing so that you can rest easy knowing you’ve done all you can to preserve your assets and provide for those close to you. Please feel free to reach out to me on this or any of your investment needs or questions. I may not always have the answers at my fingertips,  but I promise I will get them for you.   Michael Torrence 

Founded in 2010, our services include boutique hedge funds, separately managed accounts, financial planning, estate & trust services, private placements and in-house concierge services for high net worth individuals, families, and businesses.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. All investments involve risk including the loss of principal.

Please feel free to reach out to me on this or any of your investment needs or questions. I may not always have the answers at my fingertips,  but I promise I will get them for you.   Michael Torrence