Fall is a season of transition – most evident by leaves changing color and cooler weather. It’s also time to remind individuals and families of the importance of creating and maintaining an estate plan. That’s because October is National Estate Planning Awareness Month.
No estate is too small to prepare an estate plan for. No matter how large or small, almost everyone has an estate. Your estate is anything you own, including:
- Automobiles
- Real estate
- Financial assets
- Investments
- Personal possessions
- Life insurance
When you pass away, you cannot take your estate with you. Thus, estate planning involves determining how to preserve and distribute your assets after death. It also deals with managing your property, if you own any, and how to handle financial obligations if you become incapacitated.
You may wonder why anyone would want to plan for a seemingly remote tragic circumstance. However, planning ahead will save your family members from having to make tough decisions down the line and will ensure a smooth transition for your loved ones.
Estate Planning 101
When estate planning, you’re essentially making a plan for your assets in advance. Your estate plan will name the people or organizations receiving your belongings after you pass away and who you want to help you manage those assets if you become incapacited. It will also include steps to carry out your plan and can be tailored to your specific wishes.
Everyone needs three essential estate planning documents: a living will, durable power of attorney, and a last will and testament. Thorough estate planning should also include the following:
- Instructions for your financial affairs in the event you become incapacitated
- Instructions for your care if you become debilitated before death
- If necessary, arrangements for disability insurance, long-term care insurance, and life insurance
- Specifications for the transfer of your business if you become disabled, incapacitated, or pass away
- Appointment of a guardian to care for your minor children and their inheritance
- Provide for loved ones who need financial aid or may be irresponsible with money
- Provide for family members with special needs
- Minimize taxes, court fees, and legal costs associated with funding assets into a living trust
- Designated beneficiaries
As you can see, estate planning involves a lot of forethought and detail-oriented preparation. It’s not a single event. Instead, it’s an ongoing process you should review and update throughout your lifetime. Most Estate Planning Attorneys will advise you to keep your estate plan up to date in accordance with your family and financial circumstances.
Everyone Should Have an Estate Plan
According to the American Bar Association, only about 36% of American adults have a Last Will and Testament or Trust. So, if you don’t have an estate plan yet, you’re not alone.
A common misconception is that estate planning is only for retirees and older people. However, that is a fallacy. Because tomorrow is not guaranteed, and nobody knows how long they will live, estate planning is a tool that everyone should use to prepare for the end of their lives and the comfort of their loved ones.
Another common misunderstanding is that estate planning is only for wealthy people. However, estate planning can be just as helpful, if not more impactful, for families with modest assets. In addition, it can save your loved ones time, energy, and resources when managing your assets later. The bottom line is that you can never predict illness, injury, or accidents, so it’s always good to have a plan.
If You Don’t Have a Plan, the State Will Have One for You
Many people falsely assume that they don’t need estate planning if they don’t own a lot. What ends up happening is that the families of those without an estate plan are left to pick up the pieces.
The state will have one for you if you do not have an estate plan. So, for example, the state can appoint someone to sign for your business if you become disabled. Or, if you die without an estate plan, the state can make arrangements for your asset distribution that will likely not align with what you would have wanted.
How Do I Start Estate Planning?
Estate planning starts with a will or a living trust. A will only defines how assets in your name will be distributed. However, a will must still go through probate court before your assets get distributed to your intended beneficiaries. The great thing about estate planning is that it gives your family the benefit of handling such matters privately rather than by the courts.
Is Estate Planning the Same as Probate?
While estate planning is a financial plan, probate administration is the court process that will decide how to distribute your property. Probate administration only applies to probate assets. In other words, specific assets bypass the probate process and go directly to your beneficiaries. Examples of assets that don’t need to go through the probate process include the following:
- Assets in a living trust
- If the deceased person has designated beneficiaries of an asset (such as life insurance or a retirement account)
- Any property held in joint tenancy (for example, if you and your spouse own a joint bank account)
If you’re unsure about which assets need to go through the probate process, it’s always best to consult an experienced probate attorney. The titling of assets and beneficiary designations are essential tools that should be strategized in your estate plan, but only after consulting with an Estate Planning Attorney.
Start Estate Planning Today
The best time to start your estate planning is now. Estate planning should be a priority regardless of your age or income status.
We hope Estate Planning Awareness Month will encourage you not to delay any longer. If you already have one, consider reviewing or updating it. Having your estate plan updated will provide you and your family with comfort in knowing that your wishes will be honored and your family will continue to thrive in your legacy.
If you have questions about wills, trusts, estate, or probate or need legal representation, contact our Estate Planning & Probate Attorneys today.
