Why is it important to establish an estate plan?
Sadly, many families don’t do proper estate planning because they don’t believe that they have “a lot of assets” or otherwise believe that their children or loved ones can just come in and divide their assets by themselves. If you don’t make proper legal arrangements for the management of your assets and affairs after your passing, the state’s intestacy laws will take over upon your death. This often results in the wrong people getting your assets.
Even worse, your failure to outline your intentions through proper estate planning can tear apart your family as each person maneuvers to be appointed with the authority to manage your affairs. It is not unusual for bitter family feuds to ensue over modest sums of money or a family heirloom.
What does my estate include?
Your estate is simply everything that you own, anywhere in the world, including:
- Your home or any other real estate that you own
- Any interests you may have in any business
- Your share of any joint accounts
- The full value of your retirement accounts
- Any life insurance policies that you own
- Any property owned by a trust, over which you have a significant control
Who can benefit from a Trust?
If you have children or loved ones to whom you would like to transfer your assets after you pass but you are worried that these beneficiaries may be too young or may not have the ability to responsibly manage their assets, then a trust can be an invaluable asset. In its most basic terms, a trust allows a third party to manage the trust asset for the benefit of your beneficiary. In larger estates where tax savings are an important consideration, the use of trusts may play a paramount role. Oftentimes, individuals do not realize just how large their estates are. This is especially true since all assets owned or in which one has an interest are included, such as:
- Life insurance;
- Joint tenancy or community property holdings;
- Business interests.
A Trust can be designed to meet the needs of a large or small estate. Its cost can be a fraction of what the avoided probate expense or estate tax would have been.
What happens if you do not have a Will or a Trust?
If you do not have a Will or a Trust and have not used other probate-avoiding techniques, upon your death your assets will pass according to the laws of the state which has jurisdiction over your assets. The “state plan” may not provide for those you desire to obtain your assets, and if it does, often presents several of the following problems:
- Higher estate taxes;
- Additional inconvenience and expense
- Necessity of a conservatorship for assets inherited by minor children with rules probably not designed to accomplish your goals.
How do I name a guardian for my children?
If you have children under the age of eighteen, you should designate in your Last Will and Testament a person or persons to be appointed guardian(s) over their person. Of course, if a surviving parent lives with the minor children (and has custody over them) he or she automatically continues to remain their sole guardian. This is true despite the fact that others may be named as the guardian in your estate planning documents. You should name at least one alternate guardian in case the primary guardian cannot serve or is not appointed by the court.