As an estate planning attorney, I think about Wills and Trusts and Powers of Attorney every day. But the recent passing of my father led me back to the old question of: “why have an estate plan?” Even though I answer this question often, it will help you if I write out the answer.
First Thing’s First… What Is an Estate Plan?
At its most basic level, an estate plan is a collection of documents that specify how and where you want your money and other assets distributed upon your death.
- But an estate plan can do so much more for you than instruct the distribution of your assets. On top of that, an estate plan can:
- Identify someone you trust to make decisions for you if you become incapacitated.
- Specify who will care for your minor children if you’re unable to do so.
- Help minimize estate taxes and other transfer taxes.
- Help avoid the costs, publicity, and delays of probate, the court-supervised process used to value your estate, settle any debts, pay taxes, and transfer assets to your heirs.
Who Needs an Estate Plan?
You do! You want to answer the following questions:
- “Who gets what stuff when I’m gone?”
- “Who calls the shots when I’m incompetent or not mentally able to make decisions (as determine by appropriate medical professional(s)?”
- “Who will take care of my kids when die or can no longer take care of them myself?”
- “Who knows, or how can someone find out, where all my stuff is located?”
With a proper estate plan, you answer these questions and direct what will happen. Without an estate plan, the government and courts answer these questions and direct what will happen. The government will never have as much of an interest in protecting you and your loved ones as you do.
If you’re young and single, then your estate plan may not be complex. In fact, you may only need a few relatively simple documents, such as a Will, Medical Power of Attorney, and Financial Power of Attorney, in addition to making sure your beneficiary designations are accurate. If you have children, your plan becomes more complex, as you will need to name a Guardian in the event of your death or incapacity. If you have substantial wealth or significant assets, then you may be looking at one or more Trust Documents to help control how your assets are taxed, managed, and distributed.
What Is the Goal of Estate Planning?
Actually, there are three main goals of a proper estate plan:
To protect your money and your assets for your family (or other heirs that you designate).An estate plan provides a safety net that helps preserve the value of your assets, avoids lengthy wait times for disbursement, and helps ensure the legacy you envisioned is carried out.
To give you a say in who receives your stuff.Through your Last Will and Testament, you name:
- Your assets (what you have);
- Your Beneficiaries (who will get what you have);
- The Executor (who will carry out the terms of your Will).
To allow you to choose who will make your decisions.An estate plan often contains two vital legal documents which ensure your plan will be carried out the way you want it to, including:
- A Financial Power of Attorney. This document appoints a trusted relative or friend to manage your legal and financial affairs should you become incapacitated.
- A Medical Power of Attorney. This document gives a trusted relative or friend permission to make health care decisions for you based on your wishes if you become unable to do so yourself.
Still Not Convinced That You Need an Estate Plan?
OK, there is one last reason why you need an estate plan. When you become very sick or die, your loved ones are most likely going to be very sad and upset. That is the absolute worst time for your family to be trying to figure out who should be making decisions on your behalf about important things or deciding what you might have wanted to happen to your stuff. Think about it.