In this series of estate planning FAQ's, we are covering your questions on estate planning. In this article, we answer, “What is estate planning?”
Estate planning can mean many things to different people. Here is the definition from investorwords.com:
That's not a bad definition, but I believe it is too specific to make estate planning understandable. I want us to take the focus off of specific documents and put it on goals and objectives.
Here is the definition that I like:
Estate planning is about creating arrangements, usually legal, to make what you want to happen in the future happen, no matter what the future holds.
I like that definition because it gets more accurately at what real estate planning is about. Let's match my definition with some examples to make this point.
Assume that you want your kids to go to college. When you start a college fund, like a 529 Plan, that is a form of estate planning. But,
How do you make sure that goal is realized if you get sick, become disabled or die too soon? You might add an insurance plan to supplement the 529 Plan. That's estate planning too.
Now, how do you make sure the insurance money will be spent for your kids how you want, like to provide that education? You might consider establishing a trust for your kids in a Will or revocable trust that provides guidelines to the trustee to make educational opportunities for your children happen. Again, elegant examples of estate planning, or, creating arrangements to make sure what you want to happen does, even in an uncertain future.
Now, you can expand on those examples with more details that make you and your family original and unique. Your unique details provide the first clue that every estate plan is, and should be, different. No family is the same, their goals are unique and their resources unique as well. What one family may do to reach similar goals may be quite different than what you might do.
Another example illustrates this. Let's stay with our college education goal. One family with substantial resources may be considering Ivy League schools in their planning. Another family may focus on State colleges and student loans. Same goal, college education, but different planning due to the different family situations and resources.
When you look at estate planning this way, it takes on an additional meaning:
Estate planning provides the means to control the outcome of future events and circumstances.
We sometimes get to focused on the means of estate planning; Wills, Trusts, Durable Powers of Attorney, etc., and forget that those are just means and tools. What estate planning is really about is you, your family and your resources. That's what makes estate planning so interesting. Each one is different, unique and special.
What do you think? Did this article answer for you the question, “What is estate planning?” Let me know your thoughts.
In our next article, we will start to look at some of the tools that we use in estate planning, like Wills and Durable Powers of Attorney.