A will is a relatively simple legal document that puts forth your wishes regarding the distribution of property, instructions regarding the care of minor children, and other decisions related to what is to be done at the time of and immediately following your death. An estate plan, however, goes much further than a will. While anyone with assets and a family should execute a will, some experts claim that not everyone needs an estate plan. Others say that regardless of your age and net worth, an estate plan is the way to go.
What, Exactly, Is Estate Planning?
A basic definition of estate planning is this: The process of anticipating and arranging for the management of an “estate during the person’s life and at and after death, while minimizing gift, estate, generation skipping transfer, and income tax. Estate planning includes planning for incapacity as well as a process of reducing or eliminating uncertainties over the administration of a probate and maximizing the value of the estate by reducing taxes and other expenses.” Everyone considering estate planning should hire an experienced estate-planning attorney to guide you through this often-difficult process.
Estate planning often involves one or several of the following:
- Beneficiary designations
- Powers of appointment
- Property ownership
- Powers of attorney (both durable financial power and durable medical power)
Estate Planning Considerations
The following factors must be examined during the estate planning process:
- Loss of capacity: If you become incompetent and unable to manage your affairs, how would decisions be made? Estate planning allows you to make that decision while you’re alive and healthy through what’s called a Power of Attorney (both medical and financial powers of attorney will need to be decided).
- Care for minor children: The person or people you chose as guardians for your children are named in an estate plan.
- Death without a will: An estate plan allows you to specifically name who gets what in the event of your death. An estate plan also details when the money and other assets will be given to your surviving family and/or friends.
- Blended families: With so many blended families these days, an estate plan is necessary to state what goes to any former spouses versus what goes to a current spouse. Also, an estate plan allows you to list what stepchildren and half children from prior marriages will receive upon your death. Without an estate plan, your child’s spouse may wind up with your money if your child passes away at a young age.
- Financial security: Without a plan and the money provided by life insurance, your family may be unable to maintain its current living standard. An estate plan with clear directions as to who is named as the life insurance beneficiary means your family will enjoy financial security.
- Business ownership: If you own a business, an estate plan allows you to name who inherits the business or what specific directions you have for selling the business. You may want the business to stay in the family or you may want it sold right away. An estate plan will include your specific instructions for how this is to be handled after your death.
- Probate: Without a plan, your estate may be subject to delays and excess fees and your assets will be a matter of public record. But with an estate plan in place, you can structure things so that probate can be avoided.
If, after reading this, you have more questions about estate planning or are ready to begin the process, please contact an estate-planning attorney in your area and schedule an appointment today.