What You Need To Know
-Sarah Elyaman, Esq.
I know it may seem hard to believe, but you have an estate. As a matter of fact, almost everyone does. Your estate consists of everything you own— your home, checking and personal savings account, car, furniture, and much more. No matter how large or how small, everyone has an estate and something in common—you can’t take it with you when you die.
When that happens—and it is a “when” and not an “if”— you would likely want to control how your possessions are distributed to the people or organizations you care about. To make sure your wishes are carried out, you need to provide a roadmap with instructions on whom you want to receive something of yours, what you want them to receive, and when you want them to receive it. You will, of course, want this to happen with the least amount paid in legal fees, taxes, and court costs.
That, is estate planning—making a plan ahead of time and naming whom you want to receive the things you own after you die.
However, good estate planning consists of much more that than that. The ideal estate plan should also:
• Include instructions for passing your values (religion, education, hard work, etc.) in addition to your valuables.
• Protect your minor children by naming a guardian and an inheritance manager.
• Plan for family members with special needs in a way that does not disrupt important government benefits.
• Take care of loved ones who might be irresponsible with money or who may need future protection from creditors or divorce.
• Plan for the transferring of your business at your retirement, disability, or death.
• Minimize taxes, court costs, and unnecessary legal fees.
•Be an ongoing process, not a one-time event. Your plan should be reviewed and updated as your family and financial situations (and laws) change over your lifetime.
Estate planning is for everyone, not just the “elderly”. Unfortunately, we can’t successfully predict how long we will live, and illnesses and accidents happen to people regardless of their age.
Estate planning is not just for “the wealthy” either, although people who worked to build their wealth often think of the best way to preserve it. However, good estate planning often means more to families with modest assets, who don’t have a lot to lose.
The basic estate plan will include a will or a living trust. A will is similar to a game-plan that provides your instructions for the distribution of your possessions. However, it does not avoid probate, which means your heirs would need to go to court in order to inherit the assets you have left for them. The process can become expensive with legal fees and court costs. It can also take anywhere from nine months to two years, sometimes longer. Furthermore, probate files are open to the public and anyone can view the will, which may be uncomfortable for some people.
For the above reasons, many of my clients prefer a revocable trust as a vehicle to transfer their assets to their families. In addition to avoiding probate, it can prevent court control of assets at incapacity or death. Furthermore, a revocable trust remains private, is valid in every state, and can be changed at any time. A useful tool that the revocable trust provides is that it can still remain in effect once you pass. Assets can stay in your trust, managed by the trustee you have selected, until the pre-determined condition of your choosing is met. For example, your trust can be used to provide for your loved one with special needs or to protect your assets from creditors.
If you don’t think you can afford a complicated estate plan now, start with what you can afford. Don’t wait. Your planning will develop and expand as your needs change and your financial situation improves. None of us really likes to think about death or the possibility of being unable to make decisions for ourselves. This is why so many families are caught off-guard when death or incapacity becomes a real issue.
Knowing that you have put a plan in place that will protect your family and loved ones will give you and your family the stability needed to mange in a time of crisis. Piece of mind is a rare and valuable commodity. This is one of the most thoughtful and considerate things you can do for yourself and for those you love.