Explaining 6 Important Estate Planning Basics


Breaking Down the Basics of Estate Planning

You’ve worked hard to build your wealth but as the old saying goes, “You can’t take it with you.”

What do you want your wealth and assets to do after you’re gone? This is the question you answer through the estate planning process — a critical component to everyone’s financial and retirement planning.

Let’s explore the six basic estate planning documents that make up effective estate planning.



You may hear people discuss wills and trusts almost interchangeably. Although similar they are quite different.

At a foundational level, everyone needs a will. Regardless of how many assets you own or how much wealth you possess, a will is essential for everyone.

The main purpose of your will is to designate your executor, or representative, who will be responsible for settling your estate after your death. Without a will that clearly states your wishes, there will be confusion surrounding who can act as your representative and who receives which asset or property.

Additionally, for parents of minor children, a will is used to identify who will assume guardianship of your kids should you die prematurely.



Although similar to wills, a trust provides greater control over when and how assets are distributed, and specifically apply to assets held in trust.

Another key benefit of a trust is to avoid probate, which is the legal and public process of distributing a deceased person’s assets. Probate can take months and eat into heirs’ inheritance with attorneys’ fees. Plus, the fact that records are public means the world can learn about your private business affairs.

A good rule of thumb for whether a trust makes sense for you is if you have multiple beneficiaries and have a net worth of more than $1 million. If these apply to you, a trust likely makes sense.

There are several types of trusts you can set up including:

  • Revocable Trust
  • Irrevocable Trust
  • Living Trust

Each has their benefits and potential downsides, so it’s important to consult with estate planning professionals to discuss which is the right solution for you.


Beneficiary Designations

Beneficiary designations involve naming the person or entity who will receive an asset when you pass.

Common assets that require you to designate beneficiaries include:

  • Life insurance policies
  • Retirement accounts (401ks, IRAS, pensions, etc.)
  • Annuities
  • 529 education accounts

You also can add beneficiaries to your bank and brokerage accounts using POD and TOD designations.

  • Payment On Death (POD): This is added to your bank accounts. When you pass, your bank will pay all funds in your account to the beneficiary designated on the POD form.
  • Transfer On Death (TOD): This is similar to PODs but for brokerage or investment accounts. With a TOD, ownership of your brokerage account will pass to your designated beneficiary upon your death.

When deciding beneficiaries, you often can name several such as primary, contingent and tertiary.

If you’re married, your spouse should be your sole primary beneficiary on accounts such as 401ks and IRAs. But you also can name contingent beneficiaries such as your children or even tertiary beneficiaries like grandchildren.

In such a case, if your spouse doesn’t need the money when you pass, they can disclaim the funds and pass it onto the children.

Your children then can disclaim as well leaving those funds to your grandkids. Depending on their age, they could use the money to pay for school or their first home.

Beneficiary designations allow you to direct who will receive specific funds when you die, essentially trumping your will and trust. And you don’t have to engage an attorney to prepare fancy documents. You can just fill out a new beneficiary form if you change your mind.


Durable Power of Attorney & Living Will

Most estate planning conversations revolve around what happens following your death, but it’s equally important to prepare for the possibility of a serious injury or illness that makes it impossible for you to make personal financial and healthcare decisions.

To prepare for such a possibility, you must create and execute several key legal documents: a living will and durable power of attorney.

  • Living Will: General wills go into effect upon your death. But what if you’re seriously injured or in a vegetative state following an accident? This is when a living will comes into play. Your living will lays out whether you wish to die or to make every effort to keep you alive.
  • Durable Power of Attorney: A durable power of attorney grants a trusted professional, friend or family member the authority to make decisions on your behalf even when you are incapacitated.

You can designate one individual as a durable POA for your healthcare and financial decisions or split these areas between two individuals. In some states, including Arizona, there’s also a mental health power of attorney, who can act on your behalf if you develop mental conditions such as dementia or Alzheimer’s.


Estate Planning Team

Estate planning isn’t something one can typically do alone. It’s best to recruit a team of professionals who keep your best interests at heart throughout the process.

This team should include a:

  • Wealth manager
  • Certified financial planning professional
  • Estate planning attorney
  • Tax professional (EA or CPA)
  • Professional fiduciary


Ready to Explore Your Estate Planning Options?

The estate planning process involves many moving parts. The experienced team at Hosler Wealth Management understands the complexities and can help you put together an estate plan that incorporates all aspects of your financial life, meets your goals and ensures your loved ones receive what they’re entitled to.

Request a call or send us a message to see how our financial experts in Scottsdale and Prescott can help you achieve your financial goals and map out your Roth strategy to create a tax-free future.


This material is intended for informational/educational purposes only and should not be construed as specific tax, legal or investment advice. Individual circumstances may vary.

Disclosure: Securities and advisory services offered through Commonwealth Financial Network®, Member www.FINRA.org/www.SIPC.org, a Registered Investment Adviser. 700 S. Montezuma Street, Prescott, AZ 86303. Phone: 928.778.7666. This communication is strictly intended for individuals residing in AK, AZ, CA, CO, FL, GA, HI, ID, IL, MA, ME, NE, NJ, NM, NV, OH, TX, UT, VA, WA, WI. No offers may be made or accepted from any resident outside these states due to various state requirements and registration requirements regarding products and services. Fixed Insurance products and services offered through CES Insurance Agency. Tax preparation and accounting service offered by Hosler Wealth Management, LLC are separate and unrelated to Commonwealth. Any tax advice contained in this article is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding Federal or State tax penalties or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.

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