Estate Planning – Is It Really That Important?
Estate planning – it is such a short phrase, yet it can cause so much anxiety and worry. To some, estate planning means thinking about death, and consequently, many people shy away from even the thought of it. However, estate planning is really about caring for your loved ones, seeing that they are provided for, and making sure your property is distributed according to your wishes. An estate plan is your blueprint for distribution of your property after your death.
Before really understanding why estate planning is so important, it is helpful to first understand what exactly is in your "estate." Your estate consists of all your property. This includes your home and other real estate, tangible personal property (such as cards and furniture), and intangible personal property (such as insurance, bank accounts, stocks and bonds, and pension and Social Security benefits).
While a will is usually the most important part of an estate plan, it's not the only part. These days, its common for a person to have a dozen will substitutes – that is, various ways of distributing property outside of a formal will. Pensions, life insurance, gifts, joint ownership, and trusts are but a few of the ways will substitutes can transfer property at or before death quickly and inexpensively. These will substitutes are important parts of estate planning and should not be overlooked.
If you do not engage in estate planning, your property will still need to be distributed after your death. By not leaving a valid will or trust, or transferring your property in some other way, such as through insurance, pension benefits, or joint ownership, you've in effect left it to state law to write your will for you (this is called dying intestate). This doesn't mean that your money will go to the state. That happens only in rare cases in which the deceased has no surviving relatives, even very distant ones. It does mean that the state will make certain assumptions about where you'd like your money to go – assumptions with which you might not agree. In some states, the laws take into account blood and marriage by giving a share of your estate to your children, or if there are no children, to your parents, rather than giving it all to your surviving spouse. IN other states, a surviving spouse inherits the entire intestate estate and the children (or parents) are entitled to nothing. In addition, intestacy rules in most states provide nothing for family members who are not related to you by blood, marriage, or adoption. Stepchildren and unmarried domestic partners are also typically excluded.
IN order to avoid the rules imposed by state laws, you need to have an estate plan to specify who will benefit from your estate. Estate planning makes you the boss. In addition, it can also save money. For example, by having a will and planning well, you can minimize executor fees. If you name a relative who is a beneficiary under your will as an executor (most likely your spouse), he or she may waive any fees normally paid to executors, saving your estate some money. On the other hand, if you die without a will, the court will appoint a personal representative to see the estate through the probate process, and the cost will be deducted from your estate. Additionally, if your estate is large or complex, your executor may need to get outside help, for example, from a lawyer or an accountant. By planning ahead of time, you may be able to reduce or avoid such costs (and possibly some headaches for your family).
Estate planning may also help you ease the burdens on your family during their time of grief. Estate planning can give you a chance to plan your funeral arrangements leaving less for your family to worry about. You can also establish a special trust fund for family members who may need support that you won't be there to provide (for example, an elderly parent or a disabled child). Lastly, if you own a business, estate planning is vital to provide for an orderly succession and continuation of its affairs by spelling out what will happen to your interest in the business upon your death or incapacity.
Although thinking about end-of-life decisions can be stressful and uncomfortable, you should not shy away from asserting control over your property, even after death. Estate planning is an important tool that allows you to have your final wishes followed, to save money and time, and to protect your family from additional worry and stress. You should not hesitate to talk to your attorney about the value of estate planning in your circumstances and to identify the appropriate estate planning tools for you. Your attorney can guide you through this process and help you make the best plan for your situation.