10 Reasons to Create an Estate Plan
There is a common misperception that estate planning is reserved for the wealthy. Other persons rationalize that they are too young to have an estate plan. However, you don’t have to be wealthy or young to plan for your death. As the following list makes clear, estate planning is for everyone, regardless of net worth or age.
1. Minor children. Who will raise your minor children if you die? Without a plan, a court will make that decision for you. With a plan, you nominate the guardian of your choice.
2. Dying without a will. Who will inherit your assets when you die? Without a plan, your assets will pass to your heirs according to your state’s laws of intestacy. “Intestacy” means dying without a will. Your family members (and perhaps not the ones you would choose) will receive your assets without the benefit of your direction, or of a trust for purposes of protection. With a plan, you decide who gets your assets, and when and how they receive them.
3. Loss of capacity. What if you become mentally incompetent and/or physically incapacitated and you unable to manage your own affairs? Without a plan, the courts will select the person to manage your affairs. With a plan, you pick that person (through a power of attorney). Furthermore, with respect to medical decisions and end-of-life decisions, living wills (also known as advanced directives for health care) and health care durable powers of attorney enable you to decide about life support and pick someone to make decisions on your behalf about medical treatment.
4. Avoiding probate. Without a plan, your estate may be subject to delays and excess fees (depending on the state), and your assets will be a matter of public record. With a plan, you can structure things so that probate can be avoided entirely in order to minimize delays and expenses (through joint tenancy arrangements, payable on death designations, revocable living trusts, etc.)
5. Blended families. What if your family is the result of multiple marriages? Without a plan, children from different marriages may not be treated as you would wish. With a plan, you determine what goes to your current spouse and to the children from a prior marriage (or marriages).
6. Business ownership. Do you own a business? Without a plan, if you don’t name a successor, you risk the possibility of your family losing control of the business. With a plan, you can choose who will own and control the business after you are gone, thus providing for an orderly succession and continuation of the affairs of your business.
7. Children with special needs. Do you have a disabled child or a child with special needs? Without a plan, a disabled child or a child with special needs is at risk of being disqualified from receiving Medicaid or SSI benefits, and may have to use his or her inheritance to pay for care. With a plan, you can set up a Supplemental Needs Trust (also called a Special Needs Trust) that will allow the child to remain eligible for government benefits while using the trust assets to pay for non-covered expenses.
8. Financial security. Will your surviving spouse and children be able to survive financially? Without a plan (and the income replacement provided by life insurance), your family may be unable to maintain its current standard of living. With a plan, you can provide your family with financial security (through the use of life insurance).
9. Keeping assets in the family. Do you prefer that your assets stay in your own family? Without a plan, your child’s spouse may wind up with your assets if your child passes away prematurely. If your child divorces his or her current spouse, one-half (1/2) of your assets could go to your child’s spouse. With a plan, you can set up a trust that ensures that your assets will stay in your family and, for example, pass to your grandchildren.
10. Retirement accounts. Do you have an IRA or a similar type of retirement account? Without a plan, your designated beneficiary for the retirement account funds may not reflect your current wishes and may result in burdensome tax consequences for your heirs. With a plan, you can choose the optimal beneficiary of your retirement account.
If you would like to create an estate plan, or discuss you current estate plan, please feel free to call me at (405) 235-6500.