A good friend recently told me that when his father passed away, he had no will or a trust in place. As a result, for the past two years, my friend’s deceased father’s assets, including his properties, have been in the probate court system – across multiple states. The financial cost of attorney and court fees, along with the emotional headache this has caused has been very frustrating.
Having an estate plan is critically important, especially if you’re married and/ or have children or dependents relying on you. Estate planning can be complex, so it’s best to work with an experienced attorney or financial advisor to ensure the following elements are considered when crafting a customized plan.
Elements of an Estate Plan
- Will: A legal document that outlines how you want your assets distributed after your death.
- Trusts: These can help manage your assets during your lifetime and control distribution after death. Trusts can also help minimize estate taxes.
- Durable Power of Attorney: This document appoints someone to manage your financial affairs if you become incapacitated.
- Health Care Power of Attorney: This document appoints someone to make healthcare decisions on your behalf if you’re unable to do so.
- Living Will: Also known as an advance healthcare directive, it outlines your wishes for end-of-life medical care.
- Beneficiary Designations: These are specific designations on accounts like life insurance policies and retirement accounts, which supersede instructions in a will.
- Letter of Intent: A document left to your executor or a beneficiary, outlining what you want done with a particular asset after your death or specific wishes for your funeral or other services.
- Guardianship Designations: If you have minor children, it’s important to designate who will take care of them if you cannot.
- Business Succession Plan: If you own a business, it’s crucial to plan for what will happen to it upon your death.
- Asset Inventory: A comprehensive list of your assets, including bank accounts, real estate, investments, and personal property, so your executor knows what needs to be dealt with.
- Digital Assets Plan: Instructions for handling your online accounts, like social media profiles, online banking, and email accounts.
We just covered “The What”, but it’s also important to understand “The Why” – the reasons estate planning is important.
Top Reasons to Have an Estate Plan
- Asset Protection: An estate plan can help protect your assets against creditors, lawsuits, and other potential threats.
- Avoiding Probate: Probate can be a lengthy and expensive process. An estate plan can help your beneficiaries avoid this process.
- Reducing Estate Taxes: Proper estate planning can help minimize the amount of estate tax that may be due upon your death.
- Providing for Loved Ones: An estate plan allows you to provide for your family and loved ones after your death. This includes providing for minor children, a spouse, or other family members.
- Charitable Giving: If you wish to leave a legacy through charitable giving, an estate plan can help you do this in the most tax-efficient way possible.
- Business Succession: If you own a business, an estate plan can help ensure a smooth transition of ownership and management when you pass away.
- Medical Decisions: An estate plan often includes directives about your medical care if you become unable to make decisions for yourself.
- Peace of Mind: Knowing that you have a plan in place can provide peace of mind for you and your loved ones.
- Control Over Your Estate: With an estate plan, you get to decide how your assets are distributed after your death, rather than leaving it up to the state’s intestacy laws.
- Reducing Family Conflicts: By clearly outlining your wishes, an estate plan can help reduce potential disputes or conflicts among your loved ones after your death.
Many companies, including mine, offer estate planning services as an opt-in benefit during open enrollment. This is a great spend. For less than $100 per year, I have access to an attorney for all of my estate planning needs. My attorney created my family’s estate plan and makes updates as life events happen (deaths, births, etc.). Even if I didn’t have access to this benefit through work, it would be well worth the out of pocket expense of $2,000 – $7,000 to create an estate plan just for the peace of mind and to avoid probate.