Manypeopleassociate the topic ofestate planningwithpalatialmansions andfamily heirloomsthat are divided among a millionaire’s heirs, but the truth is:Everyone has an estate.If you’re young and single, you may need only a few relatively simple items, such as a will, beneficiary designations,and advance directives (e.g.,medical and financialPowers ofAttorney(POAs),living will,and organ donationpreferences).
If you have children, you need a will to name alegalguardian.Period.If you have substantial wealthor wishtoimpose restrictions onyourbeneficiaries, you may need one or more trusts to help control how your assets are taxed, managed, and distributed.
Simply put, you don’t have to have Rockefeller wealth to plan for what happens to your assets at your death.Proper estate planning ensures that your money and property pass to your desired beneficiaries withoutunnecessarycomplications or delays.If you don’t have a will when you pass away,thestatewhere you livedat the time of your deathwill determine where your assets go, typically by lineage. Your spouse mayreceive your assets, or the next closest living relative(who you may or may nothave chosen), though this variesby state.That’s why it’s important to plan ahead,regularly update it as your life circ*mstances change, andunderstandthe legal proceedings and state involvement in your area.
What is estate planning?
An estate plan is a collection of documents that specify how you want your money and other assets distributed, making it easier for your loved ones to handle your affairs during a time of grief. Making decisions in advance about what happens to your personal assets ensures your plan is honoring your wishes and provides an emotional and logistical benefit to your beneficiaries. Your estate includes your financial assets (e.g., checking, savings, investment and retirement accounts, equity in your home, life insurance policies, etc.), as well as your “stuff” (e.g., furniture, collectibles, vehicles, and other personal possessions). It even includes your pets. With that in mind, here’s why you should consider an estate plan.
Financialsecurity foryourfamily
Financial security for your family is perhaps the most important objectiveof a well-devised estate plan.It ensuresthat your family has the funds it needs, there are no delays in transferring assetsto them, and there isenoughliquidity to pay settlement costs, taxes and debts.
Establish a distribution timeline
In situations involving minor beneficiaries or those with special needsor unique challenges,it is necessary to establish areasonabledistribution timeline.Trustsare usually thebestmechanism for timing distributionsand differfrom a will in that there is no probate period. Beneficiariesmayreceive the assets more quicklyuponyour deathor you mayimposeageor sizerestrictionsonhow and when your assets are distributed. Importantly, trusts provide more privacy than a will, which becomes a matter of public record.
Legal guardians foryoungchildren
No one wants to think about leaving children behind, but ashard as this task is, designating a suitable guardian for yourminor childreniscrucial.Without it, a judge will makethedecisionfor youwith only the information at hand, without the specific knowledge you have about needs, personalities, or lifestyle.For some,the choice may be obvious –aclose relativeor friend, godparents, even a grandparent. But, forothers, it requires careful thought anddiscussionwiththosewho will be asked to raise your children and manage their inherited assets.
Form your trusted estate council
These are the people you will entrust with the management of your affairsduring yourlifetime as well as at your death.Ifyou become incapacitated andunable tohandleyourfinancialaffairsand healthcare decisions, assigning aDurablePower ofAttorney(DPOA)for your financesanda Healthcare Power of Attorney (HCPOA)ensures someonewithyour best, and pre-directed, interests in mindwill takeover.
You also need to designate anExecutorresponsible for carrying out the instructionsinyour willafter your death. If you have a trust,your named Trustee willexecute the provisions ofyourtrustduring your lifetime and at your death.It’s always a good ideatoname atleast onealternateto fill a role ifyour first choice is unable or unwillingto serveat any point in time.
The importance of good estate planning
Estate planning takes time, energy and careful thought,andsetting goals and objectivesisunique to eachperson.Hiringthe right professionals toguideyou through the estate planning processensures your intended goals are carried out successfully.
