NEXT

What is estate planning?

To put it simply, estate planning involves deciding how you want your assets distributed after you die (or become unable to make your own financial decisions). Estate planning can be complicated, so it's best to consult a financial adviser and a lawyer when drawing up your estate plan.

It's important to have a basic estate plan in place regardless of your net worth. Although it may seem like a morbid chore, estate planning offers several benefits:

  • You get to name the people to whom you wish to give your assets - and your wishes will be legally binding.
  • You can arrange it so that taxes siphon as little as possible from your estate.
  • You have the satisfaction of knowing that your financial affairs are in order, so you won't bequeath a costly administrative nightmare to your loved ones.

An estate plan can include several elements:

  • A will
  • Assignment of power of attorney, which gives the person you name the authority to manage your financial affairs if you are unable to do so
  • A living will, which is a statement of your wishes for the kind of life-sustaining medical intervention you want, or don't want, in the event that you become terminally ill and unable to communicate
  • A healthcare proxy, which authorizes someone you trust to make medical decisions on your behalf.

For some people, a trust may also make sense.

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.