An estate plan does much more than assist with wealth transfer, and even those without high levels of assets will benefit from having well-drafted plan.
If you have asked yourself that question, the answer is probably yes. Estate planning may mean many things to different people, but unless you are very unusual, you and your heirs would probably benefit from an estate plan.
Many people likely think of a will when someone mentions estate planning, but an estate plan can do so much more than simply create a will. In fact, in many estate plans, the need for a will can be virtually eliminated, and with it, the need for probate.
No two estate plans will look alike because few individuals or families face the exact same challenges or have the same needs. For someone with few assets and only one or two children, a relatively straightforward estate plan may be adequate.
A will can be used to distribute the assets of the decedent’s estate, and an advance healthcare directive for the couple and durable powers of attorney will permit easy access to assets, should someone become incapacitated.
For a family with a more complex situation, additional financial instruments, such as trusts may need to be created, allowing for the orderly transfer of wealth across the generations of the family with a minimum of negative tax consequences.
If the parents own a business or a family farm or ranch, additional concerns may exist. If they have children who have married, they may wish to both transfer ownership interests to their children, but prevent those assets from becoming entangled in a divorce or transferred out of the family as part of a divorce settlement.
Trusts are a very flexible legal instrument that can be used for everything from minimizing taxes to providing for a child with disabilities through a special needs trust. Because of their great potential and many uses, you want your estate planning attorney to carefully examine all of your finances and family relations, to ensure that they fully understand your goals and can draft the instruments that best serve those needs.
Powers of Attorney
A durable power of attorney can be invaluable to your spouse or other family members should you become disabled. While we typically think of them being employed for those of an advanced age or those suffering from mental impairments, such as dementia or Alzheimer’s disease, there are other times when they may be necessary.
If you were involved in a car accident or suffered an injury on the job, you could be incapacitated to the point where you could not sign papers or authorize the spending of money.
This could cause immediate hardship for your family, and would likely require additional legal proceedings and expense. By having these documents in place as part of a comprehensive estate plan, your spouse and family will have the tools necessary to pay the bills during your time of incapacity.
Advance Healthcare Directives
While it is never a pleasant prospect to consider, we all could suffer an illness or accident that would leave us incapacitated and without an advance healthcare directive, our family and our doctors would have little guidance as to the care we desire.This can cause unnecessary strife and conflict at what may likely be a time of high stress for the family. This is one part of an estate plan that everyone, no matter how Spartan your finances may be, should have drafted.
Is It Up To Date?
Creating an estate plan is only the first step. Because change is inevitable, part of your plan may become obsolete or incorrect. You may need to sell assets, family members may change through death, divorce or birth.
In addition, tax law will inevitably change and your circumstances, too, will likely change. Having your estate plan reviewed periodically is essential to make certain it remains an accurate reflection of your wishes.