It is important for you to have a Will. A Will is only part of what makes up a comprehensive estate plan, however. Although a Will governs the disposition of your assets at death, there are life and post-mortem situations that require additional estate planning now. Failure to effectively protect your assets and plan your estate can have potentially disastrous consequences on your loved ones and other beneficiaries.
10. Avoiding probate. You can use an estate plan to avoid probate proceedings. Otherwise, your personal representative will incur excess fees to administer your estate, and may encounter delays when attempting to distribute estate assets. Additionally, your assets become a matter of public record.
9. Providing for children and loved ones with special needs. You want to provide for heirs that have special needs. You decide to leave such heirs a gift or a bequest. Despite your good intentions, you risk disqualifying any heir who has special needs from being eligible to receive government benefits and assistance such as social security or disability payments. These heirs may have to use their inheritance to pay for their care. A Supplemental Needs Trust preserves eligibility for government benefits and uses the trust assets to satisfy any non-covered expenses.
8. Minor children. If you die without any estate planning and there is no surviving spouse, a court will decide who will act as the guardian of your surviving minor children. This may be an expensive process, and it can cause fighting and irreversible hard feelings between family members. Proper planning allows you to nominate an individual guardian for your children in the event of your death or incapacity, however. You can also create trusts and appoint a trustee to manage your minor child’s assets until the age of majority or until another age, event or date. You can also customize distribution standards such as controlling the percentage or amounts to be distributed to your child after your child reaches certain ages, or providing incentives that require the child to meet certain goals or requirements before receiving distributions.
7. Loss of capacity. What if you become incompetent and unable to manage your own affairs? What if you become incapacitated, either as the result of an accident, old age, illness, or due to any number of other causes? By creating and executing financial and medical powers of attorney, you can select a person to manage your affairs and make financial, personal and medical decisions on your behalf. You can reflect on and make the difficult decisions now. Otherwise, your loved ones will have to make the painful and emotional decisions on your behalf, often without any time to properly deliberate about such decisions. To care for an incapacitated adult is a difficult undertaking that becomes more time consuming and expensive without proper planning.
6. Blended families. If you have married more than once, you may have children from different marriages. Estate planning allows you to determine what goes to your current spouse and to the children from a prior marriage or marriages. If your spouse gets remarried after your death, proper estate planning ensures that your assets will still benefit your loved ones, including your spouse, without ending up in the hands of your spouse’s future husband or wife.
5. Keeping assets in the family. You want to provide for your children but fear that they will lose their inheritance to their spouses through subsequent divorce or premature death. Without estate planning, your children could lose half of their assets to a spouse in such situations. Creating trusts to protect a child’s inheritance ensures that your assets remain in your family. You can also use trusts to protect your heirs from lawsuits or creditors, and preserve an heir’s eligibility for government benefits, as stated in Reason # 9.
4. Financial security. Estate planning using tools such as life insurance can preserve family wealth. Aside from protecting your estate for the benefit of minor children you can also protect your estate against financially irresponsible adult beneficiaries. These adult beneficiaries may have creditor problems, have developed bad spending habits or have exercised poor financial judgment in handling their affairs. Nominating a guardian for minor children and appointing a trustee to manage the affairs of certain beneficiaries can preserve family harmony and alleviate future legal expenses.
3. IRAs and business succession planning. Unfortunately, many designated beneficiaries cash out their inherited IRAs, thus creating a taxable transaction and often squandering any remaining funds due to poor financial decision making. Proper estate planning can ensure that the IRA continues on for the lifetime of your designated beneficiaries. The IRA balances will continue to grow tax-deferred and thus creating more wealth for your loved ones. If you own a business, proper estate planning ensures that you name a successor and preserving family control of your business after your death.
2. Estate Tax Benefits. You can reduce and possibly eliminate estate tax exposure by proper estate planning and preserve more assets for the benefit of your estate. The significant loss of one’s estate to the payment of state and/or federal estate taxes, or state inheritance taxes is a great motivator to put an estate plan together. Married couples can set up AB Trusts or ABC Trusts as part of their wills or revocable living trusts. There are also a variety of estate planning tools for individuals or married couples. Additionally, estate planning allows you to provide for charitable donations to religious institutions, foundations or other worthwhile causes, while obtaining income and estate tax benefits.
AND THE NUMBER ONE REASON TO PROTECT YOUR ASSETS AND PLAN YOUR ESTATE……
1. Avoiding a messy and potentially ugly legal and family situation. Choosing someone to represent your estate or to make financial, personal and medical decisions on your behalf helps avoid family infighting and expensive litigation. Unfortunately, family disharmony is common in estate administration, even in families whose members got along well before your death. Proper estate planning may avoid such unexpected disasters, unnecessary costs and expenses.
** This article is intended to be used for solely educational and informational purposes, and is not to be understood as legal advice or any offer to provide legal advice.