Estate Planning

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 What Is Estate Planning?

A person’s estate is made up of all of the property that they own. In legal terms, this includes:

  • Personal items;
  • Bank accounts;
  • Real estate;
  • Stocks and securities; and
  • Other assets as designated by the state in which the decedent lived.

A cohesive estate plan provides instructions regarding how you wish for your property to be managed and distributed when you die. Although most people tend to associate estate planning with the wealthy or the elderly, nearly everyone benefits from establishing a comprehensive estate plan.

Estate planning is often associated with wills and trusts. While a solid estate plan includes a will and possible trusts, an estate plan can also address many other issues. Some common examples of this include, but may not be limited to:

  • How you wish to receive medical treatment if you become incapacitated and cannot speak for yourself;
  • Whether you are an organ donor;
  • Who is authorized to make legal and financial decisions on your behalf, should you become incapacitated;
  • Who is authorized to care for your minor children should you become incapicated, or when you die;
  • Who is authorized to take over your business interests; and
  • Your preferred funeral arrangements, as well as any information regarding previously made plans such as a purchased burial plot or a prepaid funeral service.

A clear estate plan can reduce your loved one’s tax obligations and the need for probate court proceedings. If you do not create and establish a sound estate plan for yourself, your estate will be distributed according to your state’s intestate succession laws. Such laws tend to vary from state to state, and generally result in property distribution that you would not have wanted. This will be further discussed below.

How Does An Estate Plan Avoid Dying Intestate?

When a person dies without leaving a valid will, they will have died “intestate.” Without the estate distribution instructions that are contained in a will, a person’s estate will generally be distributed according to their state’s probate laws.

In legal terms, intestate succession is taking the rights of another in the capacity of their successor. Succession generally refers to the transfer of rights and obligations of the decedent to their legal heirs. As such, intestate succession laws create a preference hierarchy among potential heirs. Close relatives, such as the decedent’s spouse and children, are most likely to receive distributions before any others. To reiterate, the exact laws of succession are determined by the state in which the decedent was living when they died.

An established and legally valid estate plan will determine how a person wishes for their estate to be distributed, and to whom. As such, having an estate plan in place can largely avoid dying intestate and all of the associated issues.

What Factors Should I Consider When I Begin Estate Planning?

There are various factors that you will need to take into consideration when you wish to establish an estate plan. Some examples include, but may not be limited to:

  • Your state’s specific estate laws;
  • Your life stage, as well as your family stage;
  • Your financial assets; and
  • Your long-term goals.

The specifics of your estate plan may depend on whether you are considered to be one of the following:

  • A Young, Single Person: Those who are young and single may not need an estate plan yet, unless they are considerably wealthy or have a serious illness. Another example of this would be a young, single person who is estranged from their family and would not want them to receive their belongings if they died before getting married;
  • Unmarried With a Committed Partner: Without an established will or trust, your unmarried partner will not receive any of your property when you die. The exception to this would be if none of your family survives you;
  • A Couple With a Small Child: Parents of a small child should create an estate plan that appoints a legal guardian for your minor child. Doing so should ensure their physical, emotional, and financial welfare. Additionally, you should consider purchasing a life insurance plan in order to protect your spouse and child when you die. The details of a life insurance plan should be included in your estate plan, so that authorized parties will know how to access the policy when necessary;
  • Someone Who Is Middle-Aged: As your income and assets grow with you, you will want to establish an estate plan that assists your loved ones in avoiding probate proceedings. An example of this would be how you should consider placing certain property items in a revocable trust. Or, you may consider converting your bank accounts into payable on death accounts;
  • The Parent Of a Disabled Child: If you have a disabled child, you should consider including a special needs trust. This trust can provide for your disabled child without disrupting their other benefits, such as disability disbursements; or
  • Elderly or Ill: If you are elderly and/or ill, your estate plan should focus on issues such as the division of your property and avoiding probate, as well as minimizing estate taxes. Additionally, you should consider designating a health care proxy, which allows someone you trust to make your health care decisions for you should you become incapacitated.

What Are Some Common Legal Issues Associated With Estate Plans?

As your life circumstances evolve over time, you may need to modify your estate plan. An example of this would be how you may need to modify your will if you move to a state that has different legal requirements. Failure to do so may render your will or estate plan invalid. Estate plans should also be modified if you have another child, divorce, or marry.

Some other common examples of legal issues associated with invalid estate plans include, but may not be limited to:

  • Failing to list all of your property in your will or trust documents;
  • Failure to meet your state’s legal requirements, such as having the will properly witnessed and executed;
  • Listing invalid beneficiaries on your pension, benefits, life insurance policies, and the like;
  • Naming an inappropriate or incapable executor, or estate administrator; and
  • Failing to account for potential contingencies and emergencies, such as prolonged illness or the death of a beneficiary.

If your will or other estate planning measures are considered to be invalid, your estate could be subject to lengthy and expensive probate court proceedings. Additionally, your assets will not likely be distributed according to your wishes, but rather according to your state’s intestacy laws.

What Should Be Included In My Estate Planning Strategy?

A will, trust, power of attorney, and other documents all work together to help protect your assets, as well as distribute them according to your wishes. While all estate plans will be different based on the specific estate, some examples of general elements include:

  • Your family and stakeholders understand your wishes, as well as any recent changes to your estate plan, in order to help minimize legal disputes;
  • Your estate plan clearly states your wishes and avoids vague language which may cause unnecessary disputes;
  • You have a valid will which transfers your property to your named beneficiaries, and names a suitable legal guardian for your minor children;
  • You have health care directives that cover your end-of-life medical treatment and other medical decisions; and
  • You have a financial power of attorney so that if you become incapacitated, a trusted family member or friend will make important legal and financial decisions on your behalf.

Do I Need An Attorney For Estate Planning?

If you are considering establishing an estate plan, you should consult with an experienced and local estate lawyer. Because much of estate planning is contingent upon your state’s laws, it is important to work with an area attorney so that you receive the most accurate legal advice regarding your estate.

An experienced estate lawyer can help you organize your estate, answer any of your questions, and help you determine what is essential to your estate planning based on your specific needs.

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