What are 5 Key Components of Estate Planning?

Estate planning is the process of organizing your affairs in such a way as to provide for you and your family’s welfare both during life and at death.  This process includes not only disposition of assets at death, but also sets forth instructions and authorizations for people to help you and your family in times of incapacity during life.  Estate planning can also help minimize taxes, legal expenses, and family conflict after your death. The estate planning process may differ between families or individuals, however, here are the five key components of estate planning: estate planning attorney Boston MA

  1. Wills and trusts
  2. Durable Powers of attorney
  3. Health care proxies and directives
  4. Beneficiary designations
  5. Gift giving

While there are many other aspects to consider in estate planning, these five components are the foundation upon which a solid plan can be built. With careful thought and professional guidance, you can ensure that your wishes will be carried out and your loved ones protected both during life and after you’re gone.

Wills and Trusts

Having a will drafted is a way to designate who will receive your assets at death and will be legally binding. Among other benefits, the will directs how your assets will be divided and names the beneficiaries. The will also nominates a personal representative who acts as the legal representative of the estate. The will may also nominate guardians for yourself or for minor or disabled children.

When you have a will, you have a legal document that clearly states your wishes for your assets and estate after you die.


The trust is an arrangement where you designate a trustee to oversee property for the trust beneficiaries. The timing and disbursement of assets is controlled by the trustee according to the terms and provisions of the trust. It is always a good idea to speak with an experienced estate planning attorney when considering a will or a trust.  A trust is often the centerpiece of an estate and provides many benefits, including privacy, continued and centralized management of assets and will avoid probate for those assets owned by the trust.

Durable Power of Attorney

The Power of Attorney is a legal document that names a person to act as an agent on your behalf in certain financial matters during your lifetime. The agent named under the DPOA can manage your financial affairs for you if you become incapacitated and are unable to do so on your own.

When you have a “general” Power of Attorney, your agent can perform many actions on your behalf depending on the powers authorized under the DPOA. When you have a “special” Power of Attorney, they are those powers are usually quite limited to certain action(s) and authority as set forth in the DPOA itself, such as the power for the agent to sign a particular document on your behalf.

A Durable Power of Attorney allows you to choose who you want to act on your behalf without having a court get involved. Without a DPOA, a future time of incapacity may require your family to go to court to obtain a conservatorship over you in order to manage and protect you financially.

Health Care Proxies and Directives

A Health care proxy allows you to designate another to act on your behalf regarding medical decisions if you cannot communicate those medical decisions yourself.  A health care directive, also known as a “Living Will.”   sets forth evidence of your medical intentions and directives, specifically in case of dire medical circumstances, such as existence in a persistent vegetative state.

A health care directive can be important as, a family will not always agree on the healthcare that is provided. Therefore, having healthcare directives is important as it ensures that you receive the kind of care you wish and may reduce or eliminate the potential for conflicts

Beneficiary Designations

When you have any type of retirement account, you should be sure to complete and file the appropriate beneficiary designations assigned to them. This designation will determine who is to receive the account funds or assets at your death. A review should be conducted periodically to address any changes may that need to be updated.  Without a designated beneficiary, accounts may default to your estate through the probate process.

Gift Giving

The 2022 Gift Tax Limit is $16,000.  This limit applies to gifts to any one person per year.  This gift tax annual exclusion allows you to give away $16,000 or less to any one person (other than spouse) without the need to report the gift to the IRS. When the gift provider is a married couple, then the limit is   $32,000 per recipient or done per year. If you make a gift for more than this amount to any one person during the year, you may not necessarily owe a gift tax, but you would be required to file a gift tax return.  If you are making a larger gift, I recommend discussing the proposed gift with your estate planning attorney. To contact an estate planning attorney for more information about gifting options, please call 781-380-8183.

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