The Critical Importance of an Estate Plan

Written by Soo Yeon Lee

Having an estate plan can make a big difference when it comes to preserving your legacy. Not sure if you need one? Comparing and contrasting can be an effective way to see the benefits and reasons to have an estate plan. Because everyone is different, pay special attention to the numbered items that are particularly relevant to your circumstance.

  • If you are a young parent with young children see numbers 1, 3, 6, 7, 8, 9, 13, and 14
  • If you are a parent with special needs children (or if you have special needs) see numbers 1, 5, 6, 7, 8, 9, 10, and 14
  • If you are a business owner see numbers 1, 6, 7, 8, 9, 10, 11, 12, 14, and 15
  • If you have blended family see numbers 1, 4, 6, 7, 8, 9, and 14

1. Loss of Capacity

Without a plan:

If you become incapacitated and unable to manage your affairs, a court will select the person to manage your finances and make medical decisions.

With a plan:

The person who fills that role has already been identified and authorized so that court involvement can be avoided. If you are a business owner, having a plan can help to ensure that the business runs without interruptions.


2. End of Life Decisions

Without a plan:

There may be no documentation regarding your wishes regarding life‐sustaining treatment and comfort care.

With a plan:

You have an opportunity to express your wishes and inform family members of your preferences.


3. Minor Children

Without a plan:

A court must determine who will raise minor children if neither parent is alive.

With a plan:

Parent can nominate a guardian of their choice to take care of and handle the finances for minors in the case both parents become incapacitated.


4. Blended Families

Without a plan:

Children from multiple relationships may not be treated as intended and the interests of surviving spouses may be in direct conflict with those children.

With a plan:

The creator of the estate plan determines what goes to the current spouse, if any, and what goes to any children from current and prior relationships.


5. Special Needs Planning

Without a plan:

Recipients with special needs risk being disqualified from receiving Medicaid or SSI benefits and may have to use an inheritance to pay for care.

With a plan:

A trust can be created that should enable recipients to remain eligible for government benefits while using the trust assets to pay for non‐covered expenses.


6. Avoiding the Default Rule (Intestacy)

Without a plan:

Assets pass to heirs according to state laws of intestacy, which can sometimes be family members you would not choose receive your assets. But more importantly, family members receive assets outright.

With a plan:

You, not the state, make decisions as to who inherits which assets, along with how and when the intended recipients receive those assets.


7. Minimizing Probate

Without a plan, assets owned in the decedent’s name outright go through probate. Probate can be an expensive, public and time‐consuming process. It typically gives creditors an easy forum for filing claims. Also, waiting for a personal representative to be appointed through probate can delay the timely administration of assets. There is an exception for assets not exceeding $100,000, but if you own real estate, it is subject to probate regardless of the value of all your other assets. Also, courts will not allow minor children to receive assets. Therefore, without a plan, probate may become necessary, for example, for minor children to receive life insurance proceeds.


8. Privacy

Individuals who die without a plan or even with a plan that doesn’t protect their privacy may subject their family to undue public scrutiny and unwanted exposure to the public. A careful planning can protect your privacy and keep certain sensitive information private.


9. Minimizing Family Discord and Chaos

Without a plan:

There is a greater risk that your wishes will not be well documented and that family members will have conflict and chaos over the assets or the care of your children.

With a plan:

A plan that is well‐designed, well‐communicated, and well‐executed plan, can relay your wishes, manage expectations, and reduce legal conflicts.


10. Creditor Protection

Without a plan:

Assets have no protection from creditors.

With a plan:

It is possible to engage in asset protection and take other reasonable steps to prevent creditors (including frivolous claims) from taking assets.


11. Unexpected Events

Without a plan:

Life’s unexpected events such as death of your adult child or divorces in the family may create unintended or unwanted consequences.

With a plan:

A trust can be created to help ensure that assets will stay in the family or pass to where they should belong.


12. Business Ownership

Without a plan:

A business owner may not be able to control who runs the business after they pass. This may result in a reduction in value and loss of control of the business for the family.

With a plan:

The business owner chooses who will own and control the business after they pass away or become incapacitated.


13. Retirement Accounts

Without a plan:

The beneficiary of any IRAs or other retirement account funds may not reflect your current wishes and may result in burdensome or unintended tax consequences for the beneficiaries.

With a plan:

A designated beneficiary can be selected based on your wishes and after careful consideration. Spouses can take advantage of certain planning options only available to spouses.


14. Testament

Without a plan:

There may be no written record of your values, wishes and intentions for your descendants.

With a plan:

You have the opportunity to document your values and wishes for your family members.


15. Philanthropy

State intestacy laws do not include charitable beneficiaries. With a plan, you can choose to support the causes you care about even after your death.

No comments (Add your own)

Add a New Comment


code
 

Comment Guidelines: No HTML is allowed. Off-topic or inappropriate comments will be edited or deleted. Thanks.