People often equate estate planning with a trip to their favorite dentist: something to be delayed as long as possible. In truth, estate planning is one of the most important planning exercises undertaken by an individual or couple.
To understand why, let’s define estate planning and discuss its primary objectives.
What exactly is estate planning? It is the process of planning for the care, management, and disposition of your assets upon death and when you are no longer able to manage your own affairs. Contrary to popular understanding, estate planning has profound implications during lifetime!
The National Network of Estate Planning Attorneys defines estate planning this way:
I want to control my property while I’m alive and well, care for myself and my loved ones if I become disabled, and be able to give what I have to whom I want, when I want, and if I can, I want to save every last tax dollar, attorney fee, and court cost possible.
So…estate planning is a very personal process about accomplishing your goals during your life and beyond.
What are the primary objectives of good estate planning? Different people have different objectives; however, it’s possible to identify several common themes. Here they are:
Objective #1: Care for Loved Ones.
Contrary to popular belief, people don’t plan primarily to care for assets; rather, they plan in order to ensure that they, their loved ones, and/or other entities are properly cared for. Planning is a means of providing families and advisors with crystal clear instructions about what is important and how to care for things in the event of disability or death.
Objective #2: Pass On Your Legacy.
Estate planning is more than a matter of dollars and cents. It provides an opportunity to promote and support your values and beliefs about such things as religion, marriage, education, work, and drugs and alcohol.
Objective #3: Avoid Probate and Intestacy
There are two types of probate: 1) death probate and 2) living probate.
Death probate is a legal proceeding to verify and administer a decedent’s will. More specifically, it’s a court-supervised process that oversees the transfer of a decedent’s property to other individuals after paying last expenses, taxes, and satisfying creditors, if any.
Living probate is a court proceeding commonly known as a guardianship or conservatorship. It occurs when a person becomes legally unable to manage his or her own affairs.
Intestacy occurs when you don’t have a plan for yourself. Your state of residence has a plan for you…one that is based upon that state’s so-called intestacy laws.
Objective #4: Tax Minimization
Tax minimization is an importance objective both in life planning and post-death planning. With regard to life planning, the focus is on minimizing income and gift taxes. Regarding post-death planning, the focus is minimizing the federal estate tax as well as state inheritance taxes, if applicable.
Objective #5: Plan for Disability
Most of us are likely to experience a long-term disability prior to death. Thus, it makes sense to execute certain fundamental estate planning tools such as a funded revocable living trust, financial power of attorney, and health care power of attorney. It may be worthwhile to supplement these tools with disability and long-term care insurances.
Objective #6: Peace of Mind
Estate planning is an opportunity to exercise greater control over one’s life…and legacy…by making careful, thoughtful decisions in advance…before becoming disabled and before death.
Knowing that one’s life and post-death estates are in order results in what is perhaps the best benefit of all: peace of mind.
If you don’t have an estate plan in place, schedule an appointment with an attorney who specializes in this area. If you have, there’s never been a better time to review it.