4 Reasons Estate Planning Is So Important
by Arina Smith Uncategorized 26 March 2021
There is no need to be intimidated upon hearing the word ‘estate’. Contrary to popular belief, dealing with such a concept is not only for the ultra-wealthy: legislative lingo refers to “estate” as that which consists generally of all of the property that a person has accumulated over their lifetime, most notable of which involve cars, real estate, cash, and other assets.
These assets become a concern upon the passing of an individual, particularly because it deals with how these should be allocated accordingly to their remaining living descendants.
This is where the estate plan comes in. An estate plan is a set of legal documents that secures these financial and property matters in the case of a tragic event. Anyone who wants their assets transferred immediately to their surviving relatives should pursue the drafting of a comprehensive estate plan that protects their assets and personal property, as well as ensures that the legacy left behind is the one they want.
It is never too early to start an estate plan, but it can be too late. Failing to do so can leave undesirable consequences to the ones you leave behind. Should you need a little more convincing on why you need an estate plan, here are four points to break it down:
1. It goes beyond merely distributing your assets:
An estate plan includes:
- A will that identifies the beneficiaries of specific assets,
- A will executor, usually a relative or a close friend, to oversee the estate plan process,
- A durable power attorney to make the financial, legal, and business decisions in case of incapacity,
- A healthcare proxy or medical attorney to make medical decisions regarding your health in case of incapacity,
- A living will document your end-of-life preferences,
- A living or irrevocable trust that controls the way your assets will be allocated.
2. It overrides your pre-written will by the state:
The “intestacy statute” happens when there is an absence of an estate plan and the laws of the state will instead determine what happens to your assets. If you didn’t know, everyone has a default that will be written for them by the state, in the case of an untimely tragedy.
The reason why this might not be a more attractive option to an estate plan is that it will likely not allocate your assets the way you want them to. Drafting an estate plan will override the default will, meaning you will have to execute a valid will yourself to replace it.
3. You will choose who inherits your assets and protect your family:
Most family dynamics get disrupted in the case of intestacy statutes. Having no estate plan in the first place may leave a potential mess for your relatives, and may even affect the financial security of your children’s future. The will in the estate plan addresses how you will designate the care of any child under the age of 18, as well as what they will inherit once they come of age.
4. It saves time and money:
The intestacy statute will have your assets frozen until the court system has finished thoroughly reviewing every detail of your properties, applying current state laws, and paying off debts. The decisions about how to allocate your assets will be up to them, too. It involves an extraneous amount of paperwork and court appearances by court-appointed lawyers, who will be compensated using the estate.
The process may likely take months or even years before everything can be settled, and by the end of it, your relatives might not even be left with much. The legal fees barely tell the whole story– big taxes can eat up a good chunk of financial property, too. Estate taxes are assessed on and paid by your estate, and inheritance taxes are assessed and paid by your beneficiaries.
The most efficient way to ensure that your legacy passes onto your heirs without being completely decimated is to set up living and irrevocable trusts and establish joint accounts. This way, assets can either be effectively removed from your estate or not be as meddled with because of a surviving joint owner.
So what’s the takeaway from all this? Mainly that estate planning doesn’t necessarily have to be intimidating, complicated, or even expensive. There are plenty of experienced estate-planning lawyers that can guide you with creating an estate plan, as well as customizing it according to your current financial affairs and the financial situation of your immediate family.
Estate planning is a continuous process, so experienced lawyers should also be able to help you keep it updated regularly, especially after major life changes such as marriage and divorce, and adjust it accordingly to changes in tax laws.
If you’ve decided to start discussing an estate plan together with an attorney, consider family law experts like Vahey & Betouni for professional advice.