While you may associate estate planning with the wealthy or the elderly, almost everyone benefits from a comprehensive estate plan. Your estate consists of all of your property, including personal items, bank accounts, real estate, and other assets. When you die, an estate plan dictates how your property will be distributed. A well-developed estate plan can also 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:
- How you should receive medical treatment;
- Organ donation;
- Who will make your legal and financial decisions 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, your estate will be distributed according to your state’s intestate succession laws.
Choosing the Right Estate Plan
Your estate plan will vary, depending on your life stage, your financial assets, family situation, and long-term goals. For example:
- Young, single person: You might not need an estate plan unless you are very wealthy or have a serious illness.
- Unmarried, but have a committed partner: Estate planning is a necessity. Without a will or trust, your unmarried partner will not receive any of your property.
- A couple with a small child: You should create an estate plan that appoints a legal guardian for your child and ensures his or her physical, emotional, and financial welfare. You also might consider purchasing life insurance to protect your spouse and child.
- Middle-aged: As your income and assets grow, you will want an estate plan that helps your loved ones avoid probate. For example, you might consider creating a revocable trust or converting your bank accounts to “payable on death.”
- You have a disabled child: Your estate plan might contain a special needs trust, which provides for your disabled child without disrupting his or her other benefits.
- Elderly or ill: You absolutely should have an estate plan. Your plan will focus on the division of your property, avoiding probate, and minimizing estate taxes. You also should consider designating a health care proxy—allowing someone to make your health care decisions for you if you become incapacitated.
As your situation changes, you may have to modify your estate plan. For example, you might need to amend your will if you move to a state that has different legal requirements (otherwise, it might be considered invalid). And, you should update 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 is easy to make mistakes. For example, you might:
- Forget to list all of your property in your will or trust;
- Fail to meet your state’s legal requirements (such as being properly witnessed and executed);
- List invalid beneficiaries on your pension, life insurance, and other accounts;
- Name an inappropriate executor or estate administrator; or
- Fail to prepare for contingencies (such as prolonged illness or a beneficiary’s death).
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 that help protect your assets and distribute them according to your wishes. While all estate plans are 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. This will help minimize disputes and ensure that your plan is executed according to your wishes.
- Your estate plan clearly states your wishes. If your will or other documents are vague, they may cause unnecessary disputes.
- You have a will. A will is a fundamental element of most estate plans. It transfers your property to your designated beneficiaries and appoints a legal guardian for your minor children.
- You have health care directives. You should have a document that addresses 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.
And, your lawyer can help you organize your estate—making it easier for your loved ones to identify your holdings and distribute them according to your wishes.
Do I Need an Estate Planning Attorney?
Estate planning is a highly technical practice that requires an understanding of legal, financial, and accounting principles. A poorly drafted estate plan can result in confusion, a lengthy probate process, unnecessary tax payments, and even litigation. It’s always in your best interest to consult with a skilled estate planning attorney.