An estate plan is a necessary tool that allows you to protect, maintain, and manage your property if you become ill or pass away. But more than that, it can also help people make sure their minor children are protected in the event of an emergency or minimize taxes paid on assets by beneficiaries.
What Is an Estate Plan?
An estate plan is a collection of legal documents that sets forth how you want your assets distributed when you pass away, and how you want people to handle health and financial decisions if you are unable to do so for yourself during your lifetime.
A comprehensive estate plan can help you feel more confident about the future, knowing your loved ones will be taken care of and that the legacy you leave behind is the one you want. Thoughtful planning now can help minimize taxes and probate fees, and ensure your family will have less to worry about when you are gone; however, failing to make plans for your estate can lead to unintended complications for your descendants
Importance of Estate Planning
1. Choose Who Inherits Your Assets
Estate planning isn’t just for the wealthy. If something happens to your family breadwinner or breadwinners, these items should be inherited by the heirs you designate. In the absence of an estate plan, it is most often left up to the court to decide who gets your assets. And while it may seem like an obvious and easy process, it often isn’t.
2. Override Your Pre-Written Will
Your state already has a default will written for you, sometimes referred to as the intestacy statute. Unfortunately, it most likely will not distribute your assets how you would want it to. By planning your estate, you can override this statute by either:
- Executing a valid will yourself
- Creating a revocable trust that you will transfer your assets into while you are still alive Jointly owning your assets, or
- Providing for the disposition of your assets pursuant to a transfer on death (TOD) or beneficiary designation.
There are advantages and disadvantages to each option, so in order to create the best estate plan, you should have an experienced estate planning attorney review your assets and estate planning documents.
3. Protect Your Family If You Have Young Children
Naturally, no one wants to even think about the possibility of dying young, especially anyone who has children. If you have children, you absolutely need to be prepared for such a tragedy. This will specifically involve setting up a will, which is just a portion of estate planning. In your will, you will designate how any children under the age of 18 are taken care of, and what items in your estate are to be inherited by them when they come of age.
4. Protect Your Adult Beneficiaries, Too
It’s not just your children that will need protecting, adult beneficiaries could often use the help of a solid estate plan as well. There are several factors that can lead to an adult beneficiary making bad decisions with their inheritance, such as outside influences, creditor issues, or a divorce. Your adult beneficiary might even just be bad at managing money. You can actually add clauses into your estate plan to help protect these beneficiaries from themselves and anyone who may try to take advantage of them.
5. You Can Appoint a Conservator
Not only should you name a guardian for your children, you should also name a guardian of your estate or a conservator. The conservator will manage the assets that you have designated for your child or children to inherit.
6. Help Your Heirs Avoid Overpaying in Taxes
Another major reason to set up an estate plan is to state or federal estate taxes, or state inheritance taxes on estates above the exemption amount. These taxes can be a big hit to your overall estate, which means you will be leaving significantly less than you intended to your heirs. By properly planning your estate, you will transfer your assets to your heirs with the smallest tax burden possible, making the process easier and less costly for them.
7. Avoid a Family Mess
As part of your estate plan, you can choose someone to be in charge after you die, or should you become mentally incapacitated while you are still alive. You will also decide who gets what, as well as how and when they will get it. This can help ensure your assets are handled as you wish and keep things from getting ugly and going to court if a family member thinks they have been wronged.
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.