Despite what you might think, estate planning isn’t just for the rich and famous. In fact, your family is likely to benefit from a comprehensive plan that divides your wealth, protects your well-being and provides a compass for your family’s future.
Dividing your wealth
Estate planning is often associated with the division of your assets, and this is certainly a key component. It’s typically accomplished, for the most part, by drafting a will (or a revocable living trust), which is the foundation of an estate plan.
With a valid will, you determine who gets what. It can cover everything from the securities in your portfolio to personal property, such as cars, artwork or other family heirlooms.
In contrast, if you die without a will — referred to as dying “intestate” — state law will control the disposition of your assets. This may result in unintended consequences. Do you want to take that chance?
In addition, you’ll need to name the executor of your estate. He or she will be responsible for carrying out your wishes according to your will. Your executor may be a professional, a family member or a friend. Also, it’s smart to designate a successor in case your first choice is unable to handle the duties.
Understanding probate
If your estate plan includes only a will, your estate will most likely have to go through probate. Probate is a court-supervised process to protect the rights of creditors and beneficiaries and to ensure the orderly and timely transfer of assets. The complexity and duration of probate depends on the size of your estate and state law.
If you transfer assets to a living trust, those assets are exempt from the probate process. Thus, a living trust may supplement a will, giving heirs fast access to funds.
Incapacity planning
Equally important, and often more so, a proper estate plan will help make sure the person you want to handle your financial affairs and your health care wishes has the tools to do. With a durable power of attorney for finances, you give another person — for example, a family member or a friend — the right to act on your behalf regarding bank accounts, bills, investments and other financial decisions.
By designating a health care representative, in the event you’re incapacitated that person can make medical and end-of-life decisions. Your living will guides your health care representative by telling him or her your specific wishes about artificial life support mechanisms and other health care directives.
Providing a compass
Finally, an estate plan can accomplish a variety of other objectives, depending on your preferences and circumstances. If you have minor children, you can name a guardian in your will in the event of your premature death. Without such a provision, the courts will appoint a guardian, regardless of your intent.
Your estate plan can also protect your beneficiaries against creditors, primarily through trusts designed for these purposes. Those creditors can include a divorcing spouse. While trusts were often seen mainly as tax-saving devices in the past, in most of my estate plans trusts are more often used for beneficiary protection.
Let the planning begin
Ok, so now you know you need a plan. What are you waiting for? Operators are standing by – well, sort of, … ok…. not really. We don’t have operators, but you can call us anyway.
