Technically speaking, estate planning is defined as developing a process by which to dispose of one’s assets. Although it may seem like estate planning is only useful for those who have amassed a considerable amount of property, investments, money and other valuable assets, this is a common misconception. Estate plans are important for people of all ages, backgrounds and financial standing.

Many people believe that estate planning just means putting together a trust or will agreement, but in reality, the process is usually more complex. A solid estate plan generally includes the following five basic items:

• A Last Will and Testament – A will determines who receives your property in the event of your death. This document also appoints a legal representative, sometimes referred to as an executor, to carry out these wishes. If you have minor (under age 18) children, your will also names a guardian.
• Trust – A trust is a legal tool used to transfer or share in ownership of property. An appointed trustee holds legal title to the property that belongs to a beneficiary. Trusts are often set up to sidestep all or parts of the probate process. They can also be helpful in creating tax advantages for both the donor and beneficiary.
• Power of attorney – This document allows an appointed person, called an “attorney-in-fact,” to act in place of a testator and make important financial decisions in the event of physical or mental incapacity.
• Medical directive – A medical directive, or advance healthcare directive, refers to multiple documents related to a person’s medical care, including a living will, medical instructions and a health care proxy/medical power of attorney.
• Beneficiary designations – Not always necessary in estate plans, beneficiary designations establish the heirs who should inherit assets from specific accounts such as retirement plans or life insurance.

Consult an attorney to learn more about strategic and effective estate planning in New Jersey.