A person’s estate consists of all of their property, including personal items, bank accounts, real estate, stocks and securities, and other assets. When you die, an estate plan dictates how your property will be managed and distributed. While you may associate estate planning with the wealthy or the elderly, almost everyone can benefit from having a comprehensive estate plan in place.
A well-developed estate plan can have many additional benefits. For instance, a clear plan can minimize your loved one’s tax burden and the need for probate court proceedings. While most people associate estate planning with wills and trusts, it can also address other issues such as:
- How you are to receive medical treatment;
- Organ donation;
- Who will make legal and financial decisions on your behalf if you are incapacitated;
- Who will care for your minor children;
- Who will take over your business interests; and
- Your funeral arrangements.
If you do not create an estate plan for yourself, your estate will be distributed according to your state’s intestate succession laws.
These laws may vary from state to state, and can sometimes result in property distributions that aren’t quite in line with what you may have wanted. Thus, it’s important to provide an estate plan for yourself.
What are Some Factors Consider when Choosing an Estate Plan?
Your specific estate plan will vary, depending on various factors. These can include state estate laws, your life stage, your financial assets, family situation, and long-term goals. For example, your estate plan may depend on whether you are:
- A Young, Single Person: You might not need an estate plan yet unless you are very wealthy or have a serious illness.
- Unmarried, but have a Committed Partner: Estate planning is a necessity in such a situation. Without a will or trust, your unmarried partner will not receive any of your property when you pass away.
- A Couple with a Small Child: You should opt for an estate plan that appoints a legal guardian for your child. The plan should ensure their physical, emotional, and financial welfare. You also might consider purchasing a life insurance plan to protect your spouse and child.
- Middle-Aged: As your income and assets grow over time, you will want an estate plan that helps your loved ones avoid probate. For example, you might consider creating placing certain property items in a revocable trust or converting your bank accounts to “payable on death”.
- A Parent of a Child with Special Needs: Your estate plan might contain a special needs trust, which can provide for your disabled child without disrupting their other benefits.
- Elderly or Ill: You absolutely should have an estate plan in place. Your plan should focus on issues like the division of your property, avoiding probate, and minimizing estate taxes. You also should consider designating a health care proxy. This allows someone to make your health care decisions for you if you become incapacitated.
As your situation evolves over time, you may have to modify your estate plan. For example, you might need to make changes to your will if you move to a state that has different legal requirements (otherwise, it might be considered invalid). Additionally, you should anticipate updating your estate plan if you have another child, divorce, or marry.
What are Some Common Issues Involved with Estate Plans?
Without the help of an estate planning lawyer, it can be easy to make mistakes in your estate plan. For example, you might:
- Forget to list all of your property in your will or trust arrangements;
- Fail to meet your state’s legal requirements (for instance, being properly witnessed and executed);
- List invalid beneficiaries on your pension, benefits, life insurance, and other accounts;
- Name an inappropriate or incapable executor or estate administrator; or
- Fail to prepare for contingencies or emergencies (such as prolonged illness or a beneficiary’s death).
Any of those above mistakes could potentially invalidate your will or have your estate be stuck in probate court. This means that your assets would not be distributed to your family and the wait can be costly, to your loved ones and to whatever you might have left behind. These are easy mistakes to make and can easily be avoided if you take the right steps.
What Should I Include in My Estate Planning Strategy?
Your estate planning lawyer can help you draft a will, trust, power of attorney, or other documents. These will all work together to help protect your assets and distribute them according to your wishes. While all estate plans will be different, here are some general elements of a successful plan:
- Your family understands your wishes: You should always inform your family and other stakeholders of your estate plan, as well as any recent changes to it. This will help minimize legal disputes and will help ensure that your plan is executed according to your wishes.
- Your estate plan clearly states your wishes: If your will or other estate documents are vague, they may cause unnecessary disputes.
- You have a will: A will is a fundamental element of any strong estate plan. It transfers your property to your named beneficiaries and appoints a legal guardian for your minor children.
- You have health care directives: You should have a document that takes care of your end-of-life medical treatment and other important medical decisions.
- You have a financial power of attorney: If you become incapacitated, a trusted family member or friend will make your important legal and financial decisions for you.
Also, your lawyer can help you organize your estate. This can make it easier for your loved ones to identify your holdings and distribute them according to your wishes. Above all, they can answer any of your questions and help you determine what is important for your estate plan.
Should I Hire a Lawyer to Help Me with My Estate Plan?
Estate planning is a complex area of law that requires an understanding of legal, financial, and accounting principles. A poorly drafted estate plan can result in much confusion, a lengthy probate process, unnecessary tax payments, and even litigation. It’s always in your best interest to consult with a skilled wills, trusts, and estates lawyer for help with your plan.