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Estate Planning: Everything You Need to Know

Many people think “estate planning” is only for the wealthy, but in fact, having a will, advanced directives regarding your health, and some form of a trust can go a long way towards making things easier for your loved ones when you are incapacitated or pass away, no matter what your financial circumstances are.

Having the appropriate estate documents ensures your last wishes are carried out. The people you care about the most can live considerably more comfortably thanks to a good plan. Learn all the reasons and know-how as to why an estate plan is important for you and your estate, as well as your loved ones.

What Is an Estate Plan?

An estate plan is a contract in which a person specifies who will control their possessions and other financial resources after their death or incapacitation, or how their assets will be distributed among their inheritors after such eventuality. It also relieves the legal heir’s burden of paying the asset transfer taxes that would be their responsibility otherwise.

Your fortune or riches essentially consists of everything you own, including any real estate, vehicle, investments, life insurance, and personal belongings. An estate plan organizes your affairs, and records your wishes and objectives in writing. You have control over how your wealth is donated and transferred to the people or causes you care about thanks to estate planning.

Why Is Estate Planning Important?

The main goal of estate planning is to determine what will happen to your possessions after your passing. It involves making decisions regarding your taxes, your healthcare, what should happen to your body after death, and deciding where your possessions should go.

There are many aspects to an estate plan, including the trustee and beneficiaries. You must first scrutinize and review the current condition of your estate—things you possess, including cash, cars, land, clothes, jewelry, houses, and investments.

If you don’t designate someone to inherit or manage your estate after your passing, the state law and the probate courts will decide these matters in your stead. The outcomes would likely not be in line with your preferences or your family’s needs; that’s why to avoid probate, it’s important for you to prepare an estate plan while you’re still alive and capable.

Benefits of Estate Planning

You can be confident that there won’t be any ambiguities, misinterpretations, or disputes about what you desire because a properly drafted estate plan will precisely outline and order your final wishes. Here are some benefits of establishing an estate plan.

It ensures proper division/distribution of assets

An estate trust serves as your declaration as to whom you will grant the rights to your assets after your passing. Without it, the government may choose how to distribute your wealth, and It could imply that someone else other than your intended inheritors will be named as beneficiaries and assigned the resources, which is something you would not want to happen.

It helps you prevent family disputes

Your wealth might take a very long time to distribute due to your family members having disagreements on how to divide the assets. You should have a legally binding plan in place that declares how you want your properties to be distributed. You can also use this to officially assign someone among your family members to manage your resources while you’re still alive, but physically incapable to do so. This way, you can prevent disputes among your beneficiaries because your decision is final.

It reduces estate taxes for your beneficiaries

The transfer and distribution of assets may involve significant costs and taxes. According to the latest IRS estate tax return rule, if your estate has more than $12.06 million coverage in it, you must file an estate tax return.

When someone dies, all of their assets will be taxed, and their beneficiaries won’t have a choice but to pay these amounts before they can inherit anything. Through estate planning, their tax liabilities can be significantly reduced.

It protects your dependents

Who will have custody over your children and other dependents if you pass away without a surviving spouse to care for them? In such situations, the probate court will usually choose a relative like a grandparent to be their guardian. In case of minors, they may be sent to temporary foster care like Child Protective Services and remain there until a more reliable and permanent guardian is found.

With an estate plan, you can declare who you want to take custody of your dependents in the event of your passing.

You can declare your treatment preferences

If you want to have a say regarding your healthcare before you are no longer able to speak for yourself, an estate plan can help you verbalize your decision. In a living will document, you can detail which medical treatments you prefer or would like to refuse. Your treatment preferences may include a request for blood transfusion or a “Do Not Resuscitate” order.

Alternatively, you can designate a healthcare professional to decide on your behalf when you are no longer able to make those decisions yourself, providing them with a power of attorney.

It saves your time and money

When you pass away without leaving a will, trust, or plan, you are said to have died “intestate,” and your properties are distributed in accordance with the laws of the state where you live in or where the property is. A representative will be chosen by the probate to distribute your assets if you do not have a surviving spouse or no other immediate family member is willing to take on the responsibility.

Not only does having an estate plan ensure your intended beneficiaries will receive their inheritance instead of someone assigned by the probate; it will help them avoid probate altogether, saving yourself and them from legal expenses. A fully prepared estate plan will also allow your heirs to save time coordinating with your financial institutions.

It ensures your business runs efficiently

You must have an estate plan if you are operating a small business. One of the most crucial things you can do is to designate a successor to your business affairs. By preparing a set of plans for what happens if you can no longer manage your business due to disability or permanent incapacitation, you can still be sure that your business operations will keep going smoothly even after you’re long gone.

Important Estate Planning Documents

An estate plan is made up of a number of documents. Each one is significant in its own right, and when combined they make a potent statement about your intentions.

Guardianship

This is a provision that contains details on who you want to take custody and care of your dependents in the event of your inability to do so yourself.

Will

This is a written statement of your dying wishes and preferences about the distribution of your properties, investments, bank accounts, and more.

Trust

A formal and lawful three-party agreement between you, the trustor (first party), your trustee (second party), and your beneficiary (third party). This is where you grant your trustee the authority to manage assets on behalf of and for the benefit of your beneficiary.

Financial Power of Attorney

This is a legal agreement that delegates and authorizes a devoted person to manage your finances.

Durable Power of Attorney

This is a legal document that grants authority to a trusted individual to manage all your non-health and non-medical activities.

Advance Healthcare Directive

Also known as medical power of attorney or living will, this is where you declare what specific medical procedures you want performed on you in case of an emergency where you are unable to make conscious decisions.

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What Does an Estate Planning Attorney Do?

An estate lawyer can assist you in making lawful plans for what will happen to your estate after your death or incapacitation. Without legal counsel, your family will be in disarray, and they won’t know how to distribute your assets amongst them.

Time is essential when it comes to estate planning. If you need help in putting all your needs, financial concerns, and family circumstances in writing, contact an experienced estate attorney from the Smith Law Group. We will ensure that everything is in order, and that your documents are valid and enforceable.