Many people mistakenly believe that estate planning is only necessary for wealthy or older people. In reality, a basic estate plan is essential for everyone, regardless of income, net worth, or age, because we all want to minimize confusion, unnecessary costs, and stress for loved ones after a death or in the event of incapacity.
Estate planning can be a difficult topic for many families to address, but it is a necessary one. Without proper preparation and documentation, assets such as houses, retirement plans, and savings accounts can end up in limbo for years, sometimes requiring expensive legal assistance to straighten matters out.
What is Estate Planning
This is simply the process of arranging for an orderly transfer of your assets to the people you want to receive them, it involves identifying who you want to give your assets to and when, either in your life time or at death; but sometimes done after death).
Importance of Estate Planning.
An Estate Plan Spares Heirs a Big Tax Bite
Estate planning is all about protecting your loved ones, which means in part giving them protection from the Internal Revenue Service (IRS). Essential to estate planning is transferring assets to heirs with an eye toward creating the smallest possible tax burden for them. Even just a bit of estate planning can enable couples to reduce much or even all of their federal and state estate taxes and state inheritance taxes.
An Estate Plan Eliminates Family Messes
We have all heard the horror stories; someone with money dies and the war between family members begins. One sibling may think they deserve more than another, or one sibling may think they should be in charge of the finances even though they’re notorious for racking up debt. Such squabbling can get ugly and end up in court, with family members pitted against one another.
An Estate Plan Protects Young Children
Nobody thinks of dying young, but if you’re the parent of small children, you need to prepare for the unthinkable. This is where the will portion of an estate plan comes in; to ensure that your children are cared for in a manner of which you approve, you’ll want to name their guardians in the event that both parents die before the kids turn 18. Without a will that names these guardians, the courts will step in to decide who will raise your children.
Five Estate Planning Document.
An advance directive offers loved ones and medical professionals a road map for your health care. A living will, which is a type of advance directive, explains the treatment you would like to have should you ever be unable to speak for yourself. Under what circumstances might you want doctors to stop trying to fix what ails you? When might you want pain relief, even if it hastens your death?
Durable power of attorney for health care
This document, regularly included in an advance directive, lets you appoint someone ( plus a backup) to make medical choices on your behalf when you’re unable to do so.
Revocable living trust
Drawn up correctly, this makes it easy to keep control of your finances today, let a trusted person step in if necessary, and ensure fewer problems for your heirs when you die. Now, if you just saw the word “trust” and thought, Oh, Suze, that’s just for rich people, you couldn’t be more wrong. A revocable living trust is an incredibly powerful document that can be a big help. You remain in control of all your finances as long as you want, and you can make changes to your trust as often as you want. That’s what “revocable” means.
When you have a will, you can head off potential family squabbles (or worse) by clearly spelling out whom you want to inherit items that might not be in your trust — your home or car, for example, or even specific keepsakes such as your china or tool set.
Durable financial power of attorney
Not all your financial assets can or should be in a living trust. If you’re alive yet incapacitated, the only way a trusted person, acting on your behalf, can access an IRA, pension or other financial account in your name is through a durable financial power of attorney. If you want your spouse to talk to your credit card company or the mortgage or utility folks and both your names aren’t on these accounts, the companies won’t speak to him or her without a durable financial power of attorney.
If you would like to learn more about the necessity of estate planning, any one of our estate planning attorneys would be happy to assist you.