Estate Planning, Part 1: Getting Started

An Overview of Estate Planning

September 2012

Most experts will tell you that good planning is a key to sound financial health, and part of that process is estate planning - or less delicately, thinking about what will happen to your financial assets after you're gone. And while Ally Bank doesn't offer services specifically designed for estate planning, part of our mission is to provide you with information that helps you make informed financial decisions.

This is the first article in our four-part series on the subject. Here's a look at what's covered in the other articles:

Let's start out by defining what we're talking about.

What is Estate Planning?
"Estate planning is essentially determining what someone wants to do with their assets, and the most efficient way possible of getting them to their heirs and/or beneficiaries," Chad O'Brien, a Certified Financial Planner® with Lassus Wherley, a financial management firm in New Providence, New Jersey, recently told Ally Bank in an interview.

The core document in estate planning is the will, which describes which assets will go to whom.

The will is a critical document; if you die without one, you are "intestate." In that case, a probate court, which knows virtually nothing of your wishes or situation, will determine where your assets go.

"That could be a problem in some instances - maybe you've had a huge fallout with a brother or sister, but they come up number one on the court's list," said O'Brien.

Why a Will is Important to Your Bank Accounts
When you have a will, it can still take some time to have it settled through probate court. That makes bank products - such as certificates of deposit (CDs), money market, savings and checking accounts - important factors in estate planning.

You can include joint owners or beneficiaries on these banking accounts, so that the accounts automatically transfer to these people upon your death. In other words, they're then handled outside of the will and the probate process.

"Probate can take months - if not years, sometimes - to settle through, so it kind of locks up the cash," said O'Brien. "But when somebody dies, there's often a need for immediate cash for things like funeral expenses and transportation to get loved ones to the area."

With estate planning that properly titles those accounts, that cash can be available right away.

Estate planning also can include non-financial questions as well. If you have small children, you probably will want to determine who will take care of them if you die. Estate planning can address things that happen before you die, too, such as who will make legal and medical decisions on your behalf if you should become incapacitated and unable to make these choices yourself. It is best practice to consult with an attorney to handle help guide and help with handling those decisions.

Estate Planning: Only for the Rich? If you have a lot of assets, you may want to go further than writing a will and consider creating a trust. Currently, estates of more than $5 million are taxed by the federal government. A trust is a legal structure that can help limit your estate's liability to those taxes.

But regardless of the size of your estate, you should think ahead and do some estate planning. "Sometimes people think estate planning is just for the rich," said Erin Baehr, president of Baehr Financial in Stroudsburg, Pennsylvania, in a recent interview with Ally Bank. "But all it really means is to organize the distribution of the things you own and the legacy you want to leave, large or small. Everyone should have an estate plan, if for no other reason than to make things easier on the people left behind."

How Ally Bank Fits in
Wherever you are in the estate planning process, consider that Ally Bank offers a variety of banking products from Interest Checking to savings solutions and even IRAs - all at interest rates that are consistently among the most competitive in the country.

And if you need assistance in opening your bank accounts, we're happy to help. Learn more and open accounts online, and live customer care is available 24/7 via email, chat and phone at 877-247-ALLY (2559).

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