Frequently Asked Questions: The Lesson Plan for Your Estate

You bring careful planning into your classroom every single day—that same dedication deserves a place in your personal life too. Estate planning allows you to ensure that your wishes are carried out, the people you love are provided for, and the assets you have worked hard to earn are safeguarded for the future.

Question 1: What is an estate?

You do not need to be a billionaire to have an estate. Simply put, your estate includes everything you own, such as bank accounts, real estate, vehicles, furniture, and personal belongings. These assets need to be passed on to someone else upon your death.

Question 2: What is an estate plan?

Think of an estate plan as a personalized guide for your trusted decision-makers. Using a set of legal documents, you can outline exactly what happens to your money and property as well as designate who will step in to make important decisions if you are unable to do so. 

For those with minor children, an estate plan also provides the opportunity to nominate a guardian to ensure that they are cared for.

Question 3: What happens if I do not have an estate plan?

Without an estate plan, state law determines who receives your property and who is responsible for handling your affairs. This standardized approach often results in court delays, increased expenses, and outcomes that may not reflect your personal wishes regarding your assets or the care of your children.

Question 4: Is retirement planning part of my estate plan?

Yes. As an educator, your pension (defined-benefit) plan or 403(b) (defined-contribution) plan is likely one of your largest assets.

It is vital to understand that retirement benefits often pass via beneficiary designations, not in accordance with the terms of your will. If your will says one thing but your beneficiary designation on your pension says another, the pension paperwork generally wins. You should review your designations if any of the following have occurred:

●        You have experienced a life change (marriage, divorce, birth of a child).

●        You are unsure if your spouse or children are entitled to survivor benefits.

●        You are transitioning between active employment and retirement.

As part of your estate plan, it is important to review and update your designations to ensure that they align with your overall wishes. Coordinating your retirement benefits with the rest of your plan helps avoid unintended outcomes and ensures that your assets go where you intend.

Question 5: What documents make up an estate plan?

Last will and testament. A will explains how you want your property and belongings distributed after your death. In your will, you can do the following: 

●     Name a personal representative (also called an executor) to manage your estate

●     Decide who receives your accounts, property, and personal belongings

●     Nominate a guardian to care for your minor children 

A will takes effect only after your death. It does not help if you are alive but unable to make financial or medical decisions for yourself. Generally, a will must go through probate, which is the court-supervised process for ensuring that your assets are properly managed and distributed. 

If you do not have a will, state law decides who receives your money and property, regardless of what you may have wanted. 

Revocable living trust. A revocable living trust (RLT) is a legal tool that allows you to manage your assets during your lifetime and direct how those assets should be handled after your death. It is revocable because you can usually change, amend, or revoke it as your circumstances, family, or wishes change.

One of the primary benefits of an RLT is that assets properly titled in the trust can typically avoid probate, which may allow for a faster, more private transfer of assets to your beneficiaries after death.

An RLT can also provide helpful instructions if you become unable to manage your own financial affairs during your lifetime. However, an RLT is not necessary for everyone. Whether it makes sense depends on your assets, goals, family circumstances, and the type of estate plan you need.

Powers of attorney. A power of attorney (POA) allows you to name a trusted person to make decisions or take action for you if you are unable to manage certain matters yourself. There are two main types of POAs: 

●     Financial POA. This document allows someone to manage your finances (pay bills, handle bank accounts, or sign documents), similar to assigning certain classroom tasks to a trusted teacher's aide. You can customize what they can do and when they can act.

●     Healthcare POA. This document appoints a trusted person to make medical decisions for you if you cannot speak for yourself, similar to having a substitute teacher guide your class.

Having both types of POAs ensures that your finances and healthcare matters are handled by people you trust—in accordance with your wishes—if you are unable to make decisions yourself.

Advance directive or living will. An advance directive, or living will, is your specific instruction manual for end-of-life care. It tells your medical POA exactly what treatments you do or do not want (such as life-prolonging procedures), alleviating guesswork and stress for your loved ones.

Health Insurance Portability and Accountability Act (HIPAA) authorization form. A HIPAA authorization form allows you to name trusted people who may receive medical information about you, including updates about your condition, test results, treatment information, and other health-related details. While a medical POA allows someone to make healthcare decisions for you if you cannot speak for yourself, a HIPAA authorization helps ensure that the people you choose can receive information from doctors, hospitals, and other medical providers.