Why Have an Estate Plan?
Something that is dismissed on its level of importance just as much, if not more than life insurance, is estate planning. In this post, I will address: what an estate is; what happens if you kick the bucket without planning your estate correctly; the key elements of an estate: wills and
living revocable trusts; and what you can do to take action immediately.
Of course dying is not one of those things we want to spend our time planning or thinking about, but taking care of or at least starting your estate plan now and updating it later on throughout your lifetime will save your loved one a lot of time, money, and headache when the time does come to pass on your assets and final wishes.
First off, what is an estate? An estate is something that nearly every single person has. An individual’s estate is essentially everything they own. Things like life insurance, real estate, investments, automobiles, that super weird clown collection that makes everyone else in the family extremely uncomfortable, etc.
Obviously at some point this individual is going to die and pass on to the afterlife and all of their belongings will remain here on planet Earth. What happens with these possessions depends on how the recently deceased set up their estate before their passing. Ok, so why have an estate plan?
Let’s start with what happens if the person did absolutely nothing. This happens everyday, and drives families crazy. When an individual dies or even becomes severely disabled, if they did not set up some sort of estate plan, the state gets to have authority over what happens to their
stuff. Even if the family is there and present, nothing was put in place to pass along the individual’s possessions.
Of course things like life insurance where a beneficiary or multiple beneficiaries can be named will be ok as long as the beneficiary isn’t a minor. Minors left without parents can be placed into the custody of someone outside the family, and the state even gets to decide what to do with the families inheritance. Is this enough to answer why have an estate plan? No? Please continue then!
Probate laws vary from state to state and some can be more brutal than others, but the point is that most people would not want the
probate courts deciding what to do with their belongings after their passing. Ask any family who has been to probate court, “Why have an estate plan?” You might never hear the end of it.
Some of the key elements of estate planning should include other things like:
- Instructions for passing your intangible assets
- Instructions for your care if you become severely disabled
- Naming a guardian and an inheritance manager for minor children.
- Provide for loved ones who might be irresponsible with money or who may need future protection from creditors or divorce.
- Include life insurance, disability income insurance, and long-term care insurance
- Accommodate the transfer of your business at your disability or death.
- Minimize taxes, court costs, and unnecessary legal fees.
There are two common ways to set up an estate plan and those are to set up either a will or a revocable trust. Now there are subsidiary options to wills and trusts, but to keep this simple we will only talk about these two in this article. A will, is not to be confused with a living will where
you give somebody full power of attorney to make decisions for you in the event your health does not allow you to, is a route that many people go.
A will is essentially a set of written instructions on where you want all of your stuff to go. Setting up a will is quicker and cheaper in most cases, but it does not avoid probate. Probate is a legal process whereby a court oversees the distribution of assets left by a deceased person. These usually include things like real estate, personal property and cash to name a few. Some things like life insurance or retirement plans
with named beneficiaries will not go through probate, but they may face heavy taxation.
As mentioned earlier, probate varies from state to state, and the process can take from 4 months to 2 or more years! If an individual has property in multiple states then things can get really tricky. This is why some people prefer to go with revocable trusts, also commonly referred to as living trusts.
Revocable trusts are the more expensive route, but they can also make the process of transferring assets a lot easier. Trusts are valid in any state and they can continue long after your death. You must appoint a trustee to manage your trust after your passing, and you will need to make sure
you follow all the right steps to keep everything in your trust’s name. In this case, your legacy can be managed by someone you trust and torn apart by spouses, children, creditors, etc.
These can be adjusted and updated at any point during your lifetime. One other thing that is wise to do is to find a tax expert who can help minimize tax burdens that come with the passing of your assets.
Why Have an Estate Plan? More Like When Will You Get an Estate Plan?
Life is unpredictable so the perfect time to plan your estate would be as soon as possible. There are multiple routes you can go with it. There are plenty of attorneys out there who specialize in estate planning all over the country.
There are also online platforms like NetLaw that allow you to create and securely store all of the same documents you would be able to create with an attorney at a fraction of the price.