An estate plan is a collection of documents that, when read as a whole, give you the ability to designate and describe the process by which your assets are allocated at your passing. There is a common misconception that this is a simple process that happens naturally, but that is very far from the truth. At passing, if you don’t have a will or estate plan, your assets are in risk of being controlled, to an extent, by the state and allocated through a process within the Probate Courts. This process can be very arduous, lengthy, and emotionally taxing on your loved ones, giving further motivation for the creation of an estate plan. An estate plan also includes documents that allow you to appoint someone you trust to be in charge of health and financial decisions in the event you do not have the capacity to do so for yourself.
The collection of documents typically included in an estate plan are:
A will, which identifies who you want to:
(1) Receive each of your assets
(2) Be your minor children’s guardian
(3) Be an executor to oversee the estate plan follow through process
(4) And allows you to dispense with an otherwise required insurance bond
A power of attorney, who:
(1) Makes financial decisions if you are unable to do so before your passing
(2) Pays your bills, manages investments, and makes legal or business decisions due to your incapacity
A medical power of attorney, who:
(1) Makes your medical decisions if you’re unable to do so
A living will, which:
(1) Documents your end-of-life preferences
A trust, which:
(1) Controls how and when your assets are distributed
(2) Reduces or eliminates estate taxes
One of the most important aspects of having an estate plan is the protection that it provides from your assets being subject to the state’s Probate Court system. This is the system that has been created to ensure the handling and dissemination of your assets following your passing in the absence of a will. This process can be very taxing on your family as they are left to make decisions regarding the distribution of your assets in the midst of your passing, which can lead to intra-family disputes over who gets dad’s prized watch, mom’s china, or the grandparents’ cottage that leave lasting scars on families.
Creating an estate plan will enable your family to have many of these decisions already prescribed in detail which makes the estate process significantly smoother than without one. An estate plan, while requiring time and effort, is one of the most thoughtful gifts that you can give to your family, as it is a final thank you and goodbye to the people who loved you the most.
Protects your Family:
Beyond protecting them from the probate process, another key protection that estate plans can afford you and your family are the protection from some tax burdens. When assets are allocated by skilled legal counsel, the plan allows for a level of planning that is unavailable to those who do not have an estate plan. Being able to design these transfers working cooperatively with your loved ones creates the opportunity for intentionality without people being forced to make the decisions in the wake of your loss.
By making guardianship decisions, power of attorney decisions, and selecting an executor for your will, you create a smooth transition between your life and those who will be taking responsibility for your legacy on your passing. This intentionality and forethought gives your loved ones rest from the burden of having to make these decisions when their hearts are broken.
BHMK has some of the most experienced tax and estate planning attorneys in the city who would love to help review what you have or help you create one this year.
Check out BHMKlaw.com for more information.