Estate plans may sound fancy or even out of reach. They are not. Estate planning is for everyone and not just the elderly or the rich. There are countless reasons you should have an estate plan and seven of the most important reasons are listed below:
1. You will rest assured that the beneficiaries of your estate will actually be those you want. Otherwise, if you die intestate (dying without a will) state law determines who will receive your property (typically relatives, but dependent upon your family structure). The court-supervised process of valuing your assets, paying off your remaining bills/taxes, and figuring out who will receive whatever assets remain is called “probate;” that process can be time consuming and financially burdensome and on some occasions can result in family stress or strife. There are multiple strategies to help avoid probate of your assets, including revocable trusts, titling your assets jointly, or through beneficiary designations.
2. With a properly designed estate plan, you can protect your assets for the uses you desire after you are gone. In other words, you (the grantor) could control how your assets are divided, among whom they are divided, when they are distributed, and even place conditions on those distributions. Oftentimes, trusts are utilized for a child with special needs or children who have not yet reached a level of maturity in order to responsibly handle financial matters. A revocable living trust and/or a special needs trust allow you, as the grantor, to defer when and how a beneficiary will receive certain distributions.
3. Deploying strategies and techniques to achieve tax savings and avoid other unnecessary losses to your loved-ones is a particularly important motivation behind a well-thought out estate plan. Because a trust helps to avoid the probate process, you can feel comfortable knowing you have done everything in your power to make the transfer of your wealth as accurate and pain-free as possible for those you love during an already tough time. There are numerous tax strategies that far exceed the scope of this article, all of which underscore the importance of a properly planned estate.
4. Philanthropy (the desire to promote the welfare of others, expressed especially by the generous donation of money to good causes) can be very fulfilling and can result in a lasting personal or family legacy. If you find yourself frequently donating to not-for-profit organizations, if you are passionate about certain issues in your community, or if you wish to leave a lasting legacy, you may wish to incorporate charitable or community foundation donations in your estate plan. You can prepare charitable trusts, foundations or arrange for donations in the form of cash or highly appreciated assets, such as privately-held securities, real estate and even artwork. Such strategies can be an effective way to realize significant tax savings while accomplishing your philanthropic objectives.
5. You will be able to designate who will act as the executor, personal representative or trustee of certain portions of your estate plan (and thus your legal representative after you have passed). The legal representative of your estate and/or your trust is duty bound to manage and distribute your assets per the terms of your plan.
6. You will be able to designate a guardian to care for your minor children in the event that you and, perhaps your spouse or the child’s other parent, pass away while your children are minors. The guardian will be responsible for parenting your child or children upon your passing – including providing a home, day-to-day care of your child or children, supervision, love and support – which is why it is important that you are able to assign this critical responsibility to the person or persons you feel are best fit for this position.
7. You will be able to detail certain health care decisions if you are in a position that you are unable to coherently express your wishes or provide the informed consent that medical practitioners will need. You will also be able to assign responsibility to the person or persons you trust will make the soundest medical decisions on your behalf if needed.