Many people believe they don’t need estate planning. Some believe – erroneously – that they don’t have an estate, while others think the value of whatever they do have is not sufficient enough to garner estate taxation, so what’s the point?
Understanding Estate Planning
The certainty that the only certainties in life are death and taxes has existed almost since time immemorial. With few exceptions, everyone has an estate – even the young child with a custodial account in his name and the granddaughter who received a lovely piece of jewelry for her 16th birthday. Estate planning is your personal opportunity to make decisions concerning your assets, finances, and healthcare.
Although some individuals narrowly view estate planning as a way to assign their assets to heirs, others see it as a way to perpetuate their legacies.
Bottom line: If you own something of value that you would pass on to someone else upon your death, you have an estate. Whether you know it or not, you also have an estate plan. The state has one for you free of charge (well, sort of); if you don’t get around to writing a will or designing a plan of your own. Broadly speaking, an estate plan encompasses the accumulation, conservation, and distribution of an estate. A good plan will enhance and maintain the financial security of individuals and their families.
Wills
A will is a personal declaration of your intentions about the disposition of your property at death. Everybody should have one. Because a will does not become legally enforceable until your death, it may be changed at any time before the maker’s, or testator’s, death or mental incompetence. A properly drafted will contains instructions for your personal representative; the executor. The executor is responsible for administering your estate.
A will offers many advantages, enabling you to control, to a large extent, what happens after you’re gone.
With a will you can:
- Choose the executor
- Designate a guardian for minor children or others unable to fully care for themselves
- Distribute your property to beneficiaries you choose
- Be generous to a charity at death
- Minimize estate tax
- Get a sense of accomplishment and peace of mind
The last thing you want to do is die without a will. A person who dies without a will is considered “intestate.” Dying intestate can be unnecessarily costly for your heirs and leaves you with no specific say about who receives your assets, or in what proportion those assets will be distributed. Some assets, such as individual retirement accounts and life insurance proceeds, bypass a will entirely and go directly to the beneficiaries listed and filed with the financial firm that handles those products. Otherwise, the state decides who gets what. Each state has a prescribed order for the distribution of property of those who die with no will.
Top 10 Reasons You Need One
With an estate plan, you can:
- Provide support and financial stability for your surviving spouse, children, and grandchildren.
- Preserve your wealth for later generations.
- Make sure your wishes are carried out when you can no longer manage your affairs. It’s important to have both a power of attorney and a living will.
- Support a favorite charity or cause with a gift of money, securities, or other property.
- Distribute assets in a timely fashion, with a minimum of legal hassle.
- Minimize taxes and expenses that can go along with transferring assets.
- Provide enough cash to meet expenses and prevent the forced sale of assets.
- Avoid problems for your loved ones by ensuring that the beneficiaries named on your life insurance and retirement plans are still the people you want to benefit.
- Protect your family’s privacy with an estate plan designed to prevent your will from becoming public record.
- Set and meet expectations of your survivors so there is no confusion or misunderstanding.