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Estate Planning Basics

Estate planning is the process of arranging and managing your assets during your lifetime and ensuring that they are distributed according to your wishes after your death. Proper estate planning can also help minimize taxes, avoid probate, and provide for the financial well-being of your loved ones. Here are some estate planning basics:

1. Create a Will:


  • A will is a legal document that outlines how you want your assets to be distributed after your death. It also allows you to name guardians for your minor children and an executor to manage your estate. Without a will, your assets will be distributed according to state laws, which may not align with your wishes.


2. Consider a Trust:


  • A trust is a legal arrangement that allows you to transfer assets to a trustee who manages and distributes them according to your instructions. Trusts can be useful for avoiding probate, reducing estate taxes, and ensuring that your assets are distributed as you intend. Common types of trusts include revocable living trusts and irrevocable trusts.


3. Designate Beneficiaries


  • Many assets, such as life insurance policies, retirement accounts, and bank accounts, allow you to name beneficiaries. When you pass away, these assets are typically transferred directly to the designated beneficiaries without going through probate. Ensure your beneficiary designations are up to date.


4. Durable Power of Attorney


  • A durable power of attorney allows you to appoint someone (an agent or attorney-in-fact) to make financial and legal decisions on your behalf if you become incapacitated. This document is essential for ensuring your financial affairs are managed if you can’t do so yourself.


5. Healthcare Proxy and Living Will


  • These documents specify who can make medical decisions on your behalf if you’re unable to do so. A living will outlines your preferences regarding medical treatment, including end-of-life decisions.


6. Guardianship for Minor Children


  • If you have minor children, it’s crucial to designate guardians in your will or another legal document. This ensures that someone you trust will care for your children if you pass away.


7. Review and Update


  • Estate planning is not a one-time event. It’s essential to review and update your estate plan regularly, especially after major life events like marriage, divorce, the birth of children, or the acquisition of significant assets.


8. Minimize Taxes


  • Estate taxes can significantly reduce the amount of wealth passed to your heirs. Consult with an estate planning attorney or financial advisor to explore strategies for minimizing estate taxes legally.


9. Charitable Giving


  • If you wish to leave assets to charitable organizations, consider including charitable giving provisions in your estate plan. This can have tax benefits and support causes you care about.


10. Consult with Professionals


  • Estate planning can be complex, and laws may change over time. It’s advisable to work with an estate planning attorney and possibly a financial advisor or accountant to ensure your plan aligns with your goals and complies with current laws.

Remember that estate planning is highly personal and should be tailored to your individual circumstances and goals. Your plan should reflect your wishes and provide for the well-being of your loved ones both during and after your lifetime.