Estate planning can be defined as, “the process of anticipating and arranging for the disposal of an estate.” Don’t be fooled by the name. Estate plans aren’t just for people who have a lot of money, property, investments or other valuable assets. They are for people of all ages and backgrounds. Everyone can benefit from an estate plan, and here are some reasons why.
What is estate planning, exactly?
Estate planning is often thought of as putting together a will or trust agreement, but it is much more than that. It also includes your financial, tax, medical and business planning in the event that you become unable to care for yourself or pass away.
Why do I need an estate plan?
Many people think that they have no need for an estate plan. Unfortunately, this is often wrong. It can be important to have an estate plan because no one knows what will happen in the future. Without one, if you become unable to make your own decisions a judge may appoint someone to handle your assets and personal care. This can be a lengthy and difficult process for those involved even if everyone is in agreement, and much worse if they disagree. And if you pass away without an estate plan your assets will likely be distributed to your creditors and then relatives, although they may not be your first choice of beneficiaries, or even the state if you do not have living heirs.
Thus even if you don’t have much for property, investments or other assets, there are still many reasons it can be important to have an estate plan. After all, don’t you want control over who will make decisions for you if your health renders you unable to do so for yourself and who may inherit your assets after your death?
What makes up my estate?
Your estate is made up of all of your assets. This can include your house, investments, furniture, cars, jewelry – anything of value. However, it is important to remember that your debts have an effect on your estate, too.
The true value of your estate is often the “fair market value” of your property after subtracting your debts. This can include mortgages, loans, credit cards, etc. Depending on the value of your estate after your death, you may also be responsible for estate taxes. If so, it would be helpful to incorporate this potential cost into your estate plan.
What decisions do I make during estate planning?
During the estate planning process, you have a lot of important decisions to make. These decisions will have a direct impact on your loved ones and their families. Prior to and during the estate planning process, you need to take into account questions such as the following:
- Who will make decisions about your living arrangements and health care if you become unable to decide for yourself?
- Who will manage your assets for your benefit during your lifetime if you can no longer manage them yourself?
- When does it make sense to distribute assets during your lifetime and the reasons or situations why?
- How and by whom will your assets be managed and ultimately distributed following your death?
When should I update my estate plan?
An important consideration to remember about estate planning is that your estate plan should be reviewed at least periodically and whenever a life event occurs. Estate planning can be an ever-changing, evolving process. Laws can change. People can change. Assets can change. Because of these things, it is important to revisit your estate plan regularly to consider updating. You may be glad you did.
This is just a very brief overview of some basic ideas of estate planning and should not be relied upon as legal, financial, or tax advice. If you need help or have questions about estate planning, you can ask to speak with one of the estate planning attorneys at O’Keeffe O’Brien Lyson Foss. Our knowledgeable attorneys can help you come up with an estate plan that addresses your own personal situation.